South Africans are finding new and creative ways to get around in the face of persistently high car prices which have become unaffordable for many consumers.
TransUnion’s latest vehicle pricing index reveals that a growing number of households are opting to downgrade to one multi-purpose vehicle due to the high costs associated with maintaining two cars, such as double finance instalments, insurance, and fuel.
Consequently, many of these individuals are substituting their transport demands with ride-hailing services like Bolt and Uber.
Furthermore, leasing and subscription services are increasingly playing a role in helping consumers who have been precluded from longer-term traditional finance products, said TransUnion.
Leasing enables consumers to essentially rent a vehicle for a number of years and hand it back after the contract expires without the hassle of selling it, while car subscriptions take it a step further by also bundling insurance and maintenance costs into a single monthly fee.
One of the big players in the subscription sector is Toyota, whose Kinto One service allows customers to drive virtually any Lexus or Toyota vehicle for an extended period of time without taking ownership of it.
Earlier this year, Slade Thompson, GM of Sales and Marketing at Kinto One South Africa, announced that over 2,000 vehicles are currently driving around on local roads which were obtained through Kinto One during the last two years.
“Our journey in South Africa mirrors the growing demand for flexible and hassle-free mobility solutions. With consumers and businesses alike seeking accessibility, affordability, and convenience, subscription vehicles have swiftly gained momentum,” said Thompson.
“This trend underscores a fundamental shift in mobility financing, as more people opt for subscription-based models that offer greater flexibility and control over their transportation needs.”
In select cases, it’s proven to be more affordable to opt for vehicle subscriptions than more traditional financing.
South Africans tightening the purse strings
Underscoring the evolving habits of South African commuters is a significant drop in overall new-vehicle registrations during the first three months of the year.
New passenger-vehicle sales and total vehicles financed decreased by 8.4% and 10.6% in Q1 2024, respectively, when compared to Q1 2023.
“This decline reflects the ongoing economic pressures and high interest rates that continue to deter consumers from purchasing new vehicles,” said TransUnion Africa CEO Lee Naik.
Simultaneously, the average loan value for financed vehicles rose to R391,000 in Q1 2024, up from R387,000 in Q1 2023. However, the 1.03% increase remains below the inflation rates for both new and used-vehicle prices as well as the more general Consumer Price Index.
“This indicates while nominal loan amounts have grown, they’re not keeping pace with rising vehicle costs, reflecting diminishing disposable income or spending power among consumers,” notes Naik.
Many motorists who purchased vehicles post-2021 have not yet reached a point where their loan balances can be offset by the trade-in values, and unfavourable economic indicators combined with election jitters have caused would-be car buyers to defer longer-term financial commitments for the time being.
“This environment is expected to persist, keeping vehicle sales suppressed until post-election stability is achieved and confidence is restored,” said Naik.
Join the discussion