While there are still more South Africans purchasing used rather than new cars, the ratio has never been this close.
TransUnion’s latest vehicle pricing index (VPI) for Q4 2023 shows that for every new vehicle financed in the country between October and December last year, there were 1.23 used vehicles financed.
This 1:1.23 ratio reflects a big drop compared to Q4 2022 when it stood at 1:1.98, and is the closest these figures have been since the credit insights company started tracking car finance applications back in 2011.
“The adjustment in the ratio of financed used-to-new vehicles (from 1.9 in Q4 2022 to 1.2 in Q4 2023) marks a significant shift in consumer behaviour,” said TransUnion.
The change is driven by increased consumer confidence, new vehicle availability, and the financial practicality of opting for new over used autos in the current economy, said the company.
Easing car price inflation
New vehicle price inflation stood at 6.3% and used vehicle inflation at 6.4% in Q4 2023, showing a marked year-on-year reduction of 0.7% and 2.7%, respectively.
In simpler terms, this means that new and used cars are still getting more expensive, but at a slower rate than they were in 2022.
Despite the easing of inflation there was a general downturn in the market with a 4% drop in vehicle financing and a 6.3% decrease in new passenger vehicle sales during the period under review.
Furthermore, TransUnion recorded a significant reduction in new credit accounts opened over the past two years, underscoring the erosion of purchasing power among the general South African population.
“To deal with this decline, we foresee the market segmented into new ownership models, such as subscription-based and ‘vehicle on demand’, rental, station-based car sharing, free-floating car sharing, micro-mobility services, as well as mobility on demand like ridesharing and ride-hailing,” said TransUnion.
“This in turn may drive financial inclusion and economic empowerment while stimulating economic growth.”
The used and new vehicle VPI in Q4 2023, compared to general inflation, are detailed in the following table:
| Q4 2023 | Q4 2022 | Q3 2023 | |
|---|---|---|---|
| New VPI | 6.3% | 7.0% | 6.5% |
| Used VPI | 6.4% | 9.1% | 8.0% |
| CPI | 5.5% | 7.4% | 5.0% |
During the fourth quarter of 2023, a staggering 55% of finance applications were for vehicles upwards of R300,000, 27% for those falling in the R200,000-to-R300,000 bracket, and 18% for those under R200,000.
With lower-income households unable to enter the market due to financial constraints, the average financed amount rose to R396,000 in Q4 2023, from R386,000 the previous year.
“The South African vehicle market is navigating challenges predominantly rooted in a tough economic environment characterised by escalating inflation, higher fuel costs, and currency fluctuations,” said TransUnion.
These factors contributed to a noticeable decline in vehicle sales and consumers seeking out older, less expensive used vehicles and alternative financing models.
“Nonetheless, the market is witnessing a glimmer of hope as manufacturers introduce discounts and incentives, potentially facilitating market recovery and growth despite prevailing economic adversities,” concluded the company.
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