This is according to Derick de Vries, CEO: Auto Information Solutions at TransUnion, who says SA's low gross domestic product growth rate, increases in interest rates, higher inflation, a weakening rand and lower consumer confidence have all played a role in price increases and lower sales levels.
The VPI for new and used vehicle sales rose to 6.6% and 2.2% in the first quarter of this year from 4.6% and 1.6% in the fourth quarter of 2015 respectively. The index 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.
"The index indicates that consumers are enduring substantial increases on both new and used vehicles, with higher consumer price index (CPI) on new cars. These higher new car prices will push consumers towards used vehicles, to buy down within the new space and will also force some consumers out of the market as they will tend to hold on to their vehicles for longer than they normally would," De Vries says.
He says this is evident in the percentage of both new and used cars being financed below R200,000, which has increased from 37% to 51% between quarter four in 2015 and this year's first quarter respectively.
"This indicates a shifting emphasis on the value proposition that consumers place on their vehicles, as they look for the maximum amount of value from a car."
New prices have not shifted as much as in last year's first quarter although the depreciation of the rand and other economic factors has caused the price of new cars to increase over the CPI. Manufacturers have, however, reacted and dropped their margins with marketing incentives to keep sales stimulated.
"Although manufacturers have continued through Q1 2016 with marketing incentives, with discounts ranging on average around 5%, this has had little effect on an already depressed market," says De Vries.
Used vehicle prices increased in the first quarter versus the first and fourth quarters last year. Higher new vehicle prices have stimulated greater demand for used vehicles with the new-to-used ratio sitting at 2.07 for the first quarter.
Ford and Volkswagen captured more than 30% of the used car market in the first quarter. In terms of volume of sales, Ford, Toyota and Volkswagen are the only manufacturers which appear in the top five for both new and used passenger car volumes from all sectors.
"Overall, the current economic constraints are affecting both the consumer and most vehicle-related sectors, including dealerships, finance houses and the insurance industry.
"In such times, dealers need to focus on marketing and sales incentives and, most importantly, streamline their operations," says De Vries.
"The latter can be achieved by employing credit solutions to pre-vet customers in order to know exactly what the consumer can afford, avoiding lengthy sales processes and increasing sales conversion rates."
Source: Business Day
For more than two decades, I-Net Bridge has been one of South Africa’s preferred electronic providers of innovative solutions, data of the highest calibre, reliable platforms and excellent supporting systems. Our products include workstations, web applications and data feeds packaged with in-depth news and powerful analytical tools empowering clients to make meaningful decisions.
We pride ourselves on our wide variety of in-house skills, encompassing multiple platforms and applications. These skills enable us to not only function as a first class facility, but also design, implement and support all our client needs at a level that confirms I-Net Bridge a leader in its field.
Go to: http://www.inet.co.za
