INFOGRAPHIC: High vehicle prices hurt SA

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Cape Town - Despite a significant depreciation in the Rand, new vehicle price inflation in South Africa continued to slow in the third quarter of 2015, according to the latest Vehicle Pricing Index (VPI) report released by TransUnion.

TransUnion says that economic pressure weighs heavily on the pockets of both consumers and businesses.

These factors result in a rise the local used car market, with the VPI showing that the ratio of new to used vehicles financed has marginally widened from 1.81 (one new vehicle to every 1.81 used vehicles financed) to 1.83 on a year-on-year basis.

Struggling SA sales

While the overall CPI increased from 4.1% to 4.3% in Q3 of 2015, new car inflation softened from 6.91% to 6.58%. Used car price inflation was also down during the period from 1.53% to 1.44%, reports TransUnion.

Read: Weak rand spoils petrol party for motorists

Derick de Vries, CEO of auto information solutions at TransUnion, said: “The impact of macro-economic factors is clearly evident in vehicle sales, with both new and used vehicles showing a slight slowing down in price increases vs Q2, a direct result of struggling sales volumes of new vehicles and a struggling economy.

Read: VW leads sales in SA, diesel cars slump globally

De Vries says that new car dealers have not been helped by the continued weakening of the Rand in the third quarter of 2015, which forced manufacturers to effect new price increases that are well above CPI rates.

He said: “In order to stimulate sales, extra incentives are offered to consumers to buy and to mitigate the increase in pricing. If there are a lot of vehicles in the system as a result of depressed sales, price inflation will continue to decrease.”

Challenging market

Rudolf Mahoney, head of brand and communications at WesBank, said: “These marketing incentives have done a great deal to minimise the sales decline in the new vehicle market. Dealerships are managing to keep consumers coming back and getting them into new cars – it’s helped keep the replacement cycle relatively flat in an otherwise challenging market.”

De Vries said: “The new vehicle market is highly competitive and consumers are spoiled for choice, which is challenging dealers to still hold reasonable margins. The question remains; for how long can manufacturers provide sales assistance on new vehicles and what will the impact be if they take this away? The reality is that consumers will continue to seek more affordable vehicles, of which there is abundance in the used market.”

Check out this great infographic by TransUnion: