Chris de Kock, executive head of sales and marketing at WesBank said: "We welcome the decision by the MPC. Using data from our book, which represents close to 40% of the car-financing market in South Africa, we estimate that consumers and businesses paying off cars now cumulatively have some R378 million per month more to spend into the economy than they had in December 2008, thanks to the total reduction in rates of 500 basis points."
WesBank estimates that there are currently more than 1.9 million cars held under instalment finance agreements across South Africa and that 52% of those agreements are structured with variable interest rates.
"Applying our average deal size, finance term and instalment values to the broader market, we estimate that the South African economy now enjoys a monthly cash flow injection of nearly R378 million, due to lower car-finance instalments, when compared to December 2008 when the prime lending rate was at 15.5%" said De Kock. There are, naturally, similar benefits in the home loans, credit card and personal loans markets, where linked interest rates are at the order of the day.
"We continue to urge consumers and businesses to use this opportunity to improve the health of their personal and corporate balance sheets and trust that this will have a meaningful impact on their ability to acquire and finance durable goods, like cars, over the medium term" concluded De Kock.
With the total decrease in interest rates since December 2008 now sitting at 5% and with consumer confidence slowly returning, there is a growing body of evidence that points towards the South African new car-sales market staging a much-needed recovery during the first quarter of 2010, if not slightly sooner.
