The prices of used vehicles in South Africa continued to climb between July and September 2022, registering the 14th consecutive quarter of growth, according to TransUnion’s third-quarter vehicle pricing index (VPI).
The VPI for used vehicles grew from 5.9% in Q3 2021 to 9% in Q3 2022, whilst that of new cars saw an increase from 3.8% to 6.8% year on year.
The VPI measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles which incorporates 15 top volume manufacturers.
However, the silver lining to this dark cloud is that the new car market is showing signs of normalising as supply levels start to stabilise following no less than two years of component shortages and supply-chain hurdles, said TransUnion.
New cars are preferred
Despite new and used car prices being on the rise, financial agreements in the passenger-vehicle segment continued to climb towards pre-pandemic levels, registering an increase of 8% between Q3 2021 and 2022.
New autos, in particular, enjoyed 21% higher sales volumes between July and September of this year than during the same period last year, whereas used car deals showed a smaller 3% rise.
This considerable difference in the number of deals between the categories is partly attributed to the recovering supply of new vehicles which brought consumers back into the market, said Kriben Reddy, vice president of auto information solutions at TransUnion Africa.
“The challenge the industry faces is that now that dealers have largely solved supply issues, there’s going to be an increasing demand problem as the effects of inflation and interest rates start to bite into consumer wallets,” said Reddy.
Buyers are expected to cut back on spending in the coming months, with one consequence of this being that they will hold on to their vehicles for longer. As such, “the industry is going to have to get creative to get them back into the market,” he said.
Complementing the uptick in financial agreements for new cars is the used-to-new buying ratio. A year ago, consumers bought 2.41 used vehicles for every new one, whereas in Q3 2022, this ratio was 2.05.
Off the back of rising car prices, the average value of finance deals also saw upward movement.
Compared to the third quarter of 2021, deals in the under-R200,000 bracket were down 7% in Q3 2022, while the R200,000 to R300,000 saw an increase of 1%, and the R300,000-and-up bracket enjoyed 6% more purchases being made.
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