With the vehicle market being stifled by elevated interest rates, high car prices, and political uncertainty, dealers will have to start offering enticing incentives to get South Africans to buy cars again.
This was the consensus in credit agency TransUnion’s latest Vehicle Pricing Index, which noted an 8.4% decrease in new passenger-vehicle sales and a 10.6% drop in total vehicles financed in the country in the first quarter of 2024.
The report states that significant macroeconomic challenges underscored by no change in interest rates for over a year and persistent low GDP growth, coupled with wariness surrounding the national elections which took place in June, damaged consumer and business confidence and motivated would-be car buyers to defer long-term financial commitments.
This has seen the used-to-new ratio of vehicles financed drop to 1.15, down from 1.86 a year prior, meaning credit providers financed 1.15 used vehicles for every 1 new vehicle during Q1 2024.
TransUnion forecasts that these trends will continue until greater economic stability and consumer confidence return, which will affect vehicle dealerships’ bottom lines.
In turn, this will force dealers to market more aggressive promotions and specials in order to meet their monthly sales targets.
“We forecast the trend of preferring used vehicles may stabilise — with potential increases in new-vehicle sales as economic conditions improve and dealer incentives continue to play a pivotal role,” said TransUnion Africa CEO, Lee Naik.
Early signs of what’s to come
Several automakers have already introduced attractive offers in a bid to inject life into their sales departments during the remainder of the year.
This July, Volvo is running a promotion in which it is covering the Value Added Tax on select purchases of the XC40 and XC60, effectively giving buyers 15% discount.
Hyundai is likewise providing a R50,000 cash-back deal on the Creta and a R70,000 reimbursement on the larger Grand Creta.
Meanwhile, VW has a special on the Amarok until September, allowing customers to get insurance for a flat rate of R899 for the first year of ownership.
Sister brands Omoda and Jaecoo (O&J) recently also announced their partnership with Absa, which it said will make its vehicles “even more accessible for local customers” through new finance deals.
“Fans of Brand O&J should keep their eyes peeled for exciting credit offers in the near future,” said Shannon Gahagan, O&J National Brand and Marketing Manager.
Consumers looking to get into a new set of wheels over the next six months should pay attention to these types of incentives, which could enable them to get a better car than what their budget initially allowed.
They might even get more enticing the further we go into 2024, as dealers generally try to move all their stock before the new year arrives and have been known to provide generous year-end discounts to achieve this.
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