TransUnion SA's Vehicle Pricing Index (VPI) reports that new cars were back in vogue during the first quarter of the year as competitive prices increased consumer demand.
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The competitive prices were driven by rand strength, lower interest rates, and inflation.
The VPI is a quarterly report compiled by TransUnion that examines the link between the year-on-year price increases for both new and used vehicles, drawing data from a selection of South Africa’s most popular passenger vehicles from 15 top-volume manufacturers.
The VPI reports new and used vehicle pricing dropped to 2.3% and 2.9% in Q1 2018 from 8.8% and 3.7% in Q1 2017, respectively. A lower VPI indicates slower pricing increases and, therefore, greater relative affordability for consumers.
While extended period of rand weakness a year ago drove consumers to the pre-owned market, the new data show the pendulum is swinging back to the new vehicle market.
Further data reading
Notably, the used-to-new ratio created from the data, which is based on finance deals registered in the last quarter, indicates the finance houses are financing 2.09 used vehicles for every one new vehicle as compared to 2.49 in Q1 2017. This follows the trend of the VPI where the new car prices had slowed down over the last three quarters.
According to the data, the used passenger vehicle pricing index has been consistent in 2017, ranging between 3.5% and 3.7% although in Q1 2018, TransUnion observed a drop to 2.9%. The index measured 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. Vehicle sales data collated from across the industry was used to create the index.
Head of TransUnion Auto, Kriben Reddy, says: “We are coming off a low base and are hovering around 450,000-500,000 new cars being sold a year, so we are still trying to get back to 2007 levels and clearly still have a long way to go despite all the positives. However, we probably saw a bottom in the vehicle market sometime in 2017 and this sector is now on the rise, specifically in the new vehicle space”.
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