Bad news for anyone planning to sell their car in South Africa

The flood of Chinese cars entering South Africa is putting pressure on the second-hand market, which is likely to impact the resale value of anyone looking to sell their vehicle.

This market pressure was identified in FirstRand’s 2026 annual report, which found that the introduction of several new Chinese brands has become a financial risk for WesBank, one of South Africa’s largest vehicle finance houses.

Chinese cars are, on average, much more affordable than equivalent models from legacy brands. Because of this, many households are now choosing to buy a brand-new Chery or GWM rather than settling for a 5-year-old Volkswagen.

This has led to a depreciation issue in South Africa’s auto sector, as used vehicles are becoming less attractive to buyers, resulting in greater losses for motorists concerned about their cars’ resale value.

“The pressure reflects weaker used-vehicle prices following stronger new-vehicle supply and lower-priced market entrants,” said WesBank.

WesBank’s normalised earnings dropped 20% from R1.739 to R1.394 billion in the financial year ended June 2026.

Its profit before tax also declined 20% to R1.909 billion despite strong growth in vehicle finance, reported BusinessTech.

Core lending advances increased by 13% to R212.686 billion, while retail vehicle asset finance new business volumes grew 18%.

However, credit impairments worsened over the same period, increasing by 26% to R2.604 billion.

Retail vehicle asset finance proved to be WesBank’s largest casualty, as profits before tax dropped 35% to R1.016 billion, which was attributed to the pressures in the South African car market.

“Chinese car brands are entering the market rapidly, offering advanced technologies, electric and hybrid options, and competitive pricing,” it said.

Buying new is cheaper than pre-owned in South Africa

TransUnion’s Q2 2026 Mobility Insights Report found that affordability has become even more of a decisive factor influencing vehicle purchasing decisions in South Africa.

It highlighted that new passenger car sales increased 15.8% year-on-year in Q2, but that the used-to-new vehicle registration ratio climbed from 2.3 to 2.7 between the first and second quarter.

Chinese brands are a key reason for this shift. The sale of cars from the People’s Republic has increased 72% year-on-year, giving them a 22.4% share of the passenger and light commercial vehicle segments.

“Affordability has become one of the defining themes of South Africa’s mobility market,” said Ayesha Hatea, director of research and consulting at TransUnion Africa.

“Consumers are increasingly looking for the best overall value proposition rather than simply the lowest price.”

The decline in pre-owned car prices also poses a threat to finance firms, since a vehicle serves as collateral for a loan.

Banks are therefore able to repossess a car and sell it to recover some of the outstanding debt in situations where the customer defaults.

If the vehicle is worth less than anticipated, the bank will recover less money, meaning it loses more if the client defaults.

For this reason, WesBank has raised a “judgmental management out-of-model adjustment” for the inherent LGD risk on used motor vehicle prices due to new lower-priced entrants to the South African market.