Business
New Vehicle Inflation Hits Three-Year Low as Affordability Concerns Drive Shift to Used Cars
South Africa’s automotive market is witnessing a significant shift as new vehicle inflation hits its lowest level in three years, while used car prices continue to decline. According to the latest TransUnion South Africa Vehicle Price Index, new vehicle prices rose by just 1.7% year-on-year in the fourth quarter of 2024, marking the slowest rate of inflation since 2021. Meanwhile, used vehicle prices fell by 2.8% year-on-year, extending a year-long downward trend.
This trend is largely driven by affordability concerns, as inflationary pressures and high vehicle prices force consumers to rethink their purchasing decisions. The report highlights a growing preference for used vehicles, with financing for pre-owned cars outpacing new car financing at a ratio of 1.56 to 1, up from 1.23 in the same period last year.
A Shift Towards Used Vehicles
The data underscores a clear shift in consumer behaviour, with more buyers opting for used vehicles over new ones. This trend is fueled by economic challenges, including rising living costs and tighter household budgets. Despite improved economic conditions and a 14.4% year-on-year increase in new vehicle registrations, affordability remains a key concern for many South Africans.
TransUnion’s report also reveals that while new vehicle finance agreements grew by 12.7% year-on-year, there has been a noticeable change in the value of financed vehicles. Lower-value agreements (under R250,000) have declined, while financing for vehicles priced between R250,000 and R750,000 has increased. This suggests that consumers are adapting to economic pressures by seeking more flexible financing options and adjusting their purchasing habits.
What’s Driving the Trend?
Several factors are contributing to the decline in new vehicle inflation and the rise in used car purchases:
- Affordability Concerns: High new vehicle prices and inflationary pressures are pushing consumers towards more affordable used options.
- Improved Financing Options: Flexible financing solutions are making it easier for consumers to purchase vehicles within their budget.
- Economic Uncertainty: Despite signs of economic recovery, many households remain under financial strain, influencing their buying decisions.
- Market Saturation: The availability of quality used vehicles has increased, providing consumers with more options at lower price points.
What Does This Mean for Consumers?
For South African consumers, the current trends present both opportunities and challenges. On one hand, the decline in used vehicle prices and the availability of flexible financing options make it easier to own a car. On the other hand, the slow growth in new vehicle prices suggests that the market is still adjusting to economic conditions, which could impact long-term value and resale potential.
Looking Ahead
As the automotive market continues to evolve, affordability and flexibility are likely to remain key drivers of consumer behaviour. While new vehicle sales are expected to grow gradually, the used car market is poised to maintain its dominance in the short to medium term. For automakers and dealers, understanding these shifting dynamics will be crucial to staying competitive in an increasingly price-sensitive market.
South Africa’s automotive landscape is undergoing a transformation, with affordability concerns reshaping consumer preferences. Whether you’re in the market for a new or used vehicle, now is a good time to explore your options and take advantage of the current trends.
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