Western Cape used vehicles cheapest in SA

© Tatiana Belova – za.fotolia.com

Paul-Roux de Kock, head of Analytics at Lightstone, says the increased number of car dealerships and stock availability in South Africa's biggest provinces can drive down prices as dealers offer better deals to compete for the business of potential buyers. "Gauteng caught up to KwaZulu-Natal and is now jointly the second cheapest province to buy cars in, with prices 0.4% lower than the national average. The Western Cape remains the cheapest with 0.6% below the national average.

"The City of Johannesburg also moved up from being the 10th cheapest municipality to being the 7th cheapest municipality to buy second hand cars. Vehicle prices in this municipality are currently 2.1% below the national average. In the less competitive markets, the motor dealers will be less likely to offer competitive deals - such as in the Blue Crane municipality where vehicles are being sold at 5.1% above the national average."

While one might note vehicle prices differing from province to province, new vehicles are generally sold at the manufacturer's specified price - irrespective of location. When it comes to second hand vehicle prices, they are not only determined by car specific factors like mileage, condition etc. but also by market supply factors like the stock availability of the vehicle in the area, as well as the demand for the type of vehicle.

As an example, if a lot of people in Mpumalanga want to buy SUVs to deal with worsening road conditions, but only a small number of people are willing to sell their SUVs, it will create a market where dealers or sellers can demand higher prices for these vehicles. Each vehicle make, type and model will be affected differently by these market conditions.

Coastal provinces

Second hand car prices in coastal provinces can also be negatively affected by the (often perceived) effect that rust can have on the vehicle's condition. It is interesting to note, however, that newer cars are increasingly making use of more advanced materials that are less affected by rust.

With vehicle prices fluctuating from province to province, it is essential that insurers are tracking these types of trends to better serve their clients. "Innovative insurers are already starting to incorporate location specific and geo-demographic factors in their rating engines and we expect to see more of this going forward. We might even see insurers of the future building customised products that will offer higher/lower pay-outs on claims dependant on where you live," De Kock adds.