TransUnion’s latest quarterly overview of consumer credit trends report shows that more and more South Africans are struggling to afford new cars, or even the ones they currently own.
In the first quarter of 2024, vehicle finance originations – which can be described as the number of loans handed out by credit providers to consumers seeking to finance cars – declined by 7.1% to 114,000.
Vehicle originations is the only category among five credit products tracked by TransUnion that experienced a year-on-year decrease.
In contrast, credit cards, personal loans, clothing accounts, and home loans all saw a rise in originations of between 3.1% and 20%.
The number of vehicle finance accounts in Q1 2024 also dropped by 1.7% to 2.1 million, indicating that more and more consumers are staying out of the car market after paying off their current vehicles.
Simultaneously, delinquency rates on vehicle finance accounts, which is the percentage of loans that are past due, increased by 20 basis points to 5.4% in the first quarter of 2024, alluding that a growing number of motorists are struggling to meet their current car payments.
Consequently, the average outstanding balance per account rose by 5.3% to R240,043.
These movements were primarily influenced by macroeconomic pressures such as high interest rates, car prices, and fuel costs, combined with consumers’ change in preference to retain their existing vehicles for longer, said TransUnion Africa CEO Lee Naik.
In the first quarter of the year, the average vehicle price increased by 1.7% to R392,630.
The alternative
With many South Africans’ wallets feeling the heat, commuters have been forced to find new and creative ways to get around.
In TransUnion’s latest vehicle pricing index, the firm noted 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.
To supplement their transport needs, many of these individuals have resorted to using ride-hailing services like Bolt and Uber on a regular basis.
Furthermore, leasing and subscription services are increasingly playing a role in helping consumers who may struggle to secure traditional vehicle financing to become active members of the economy.
Leasing enables one to rent a vehicle for an extended period of time without taking ownership of it, while car subscriptions function in a similar fashion but also bundle insurance and maintenance costs into a single monthly fee.
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