The majority of South Africans who have taken out vehicle finance sign up for a loan of over R250,000.
This is according to the Experian South Africa Consumer Default Index for Q4 2020, which looks at how much credit people are using.
Jaco van Jaarsveldt, Chief Decision Analytics Officer at Experian Africa, said they have seen a year-on-year deterioration in the number of people defaulting on loans.
This year-on-year deterioration can largely be attributed to the worsening in the vehicle loans segment.
“People should continue to manage their finances carefully to ensure that they can endure the uncertainty ahead, while lenders will need to use insights from data to make the best decisions on their customers,” said van Jaarsveldt.
How big car loans are
As part of the Consumer Default Index report, Experian looked at the size of vehicle loans among different groups in South Africa.
The groups are defined by how people spend their money and the resources they have access to.
An overview of three of the groups, and how big their car loans are, is provided below.
The Luxury Living group is defined as being made up of affluent individuals who “represent the upper crust of South African society”.
They represent 2.5% of the credit-active population, and can afford expensive homes and cars.
Their average opening vehicle loan balance is typically above R450,000, said Experian.
This group is “highly exposed to secured credit” and accounts for more than 30% of the vehicle loan market.
The next group is the Aspirational Achievers, who make up 9.3% of the credit-active population.
They are defined as “young and middle-aged professionals with the resources to afford a high level of living”.
This group has an average opening vehicle loan balance of over R250,000, and account for 45% of the vehicle loan market.
Next is the Money Conscious Majority, who make up 40% of the credit-active population.
These are “older citizens” who are conscious of where and how they spend their money, and will “often seek financial products to cover basic needs or unforeseen expenses”.
This group’s average opening vehicle loan balance is around R160,000.