The latest Vehicle Price Index figures released by TransUnion has indicated that the demand for used vehicles continues to increase, with one new vehicle financed for every 1.78 used. New car price inflation has also softened, while the price inflation of used cars is accelerating with increasing speed.
“It is not unusual when considered against the backdrop of lower consumer confidence and increasing financial pressure,” says Jeff Osborne, Head of Gumtree Automotive. “Fuel and electricity costs, the rising cost of new vehicle imports, uncertainty about the economic outlook – all have an impact – and because the gap in pricing between a new vehicle and a used model is so significant, prospective car buyers will look to the secondhand market, without question. And of course, on the other side of the coin, sellers will take advantage too.”
While Osborne says that the quality and quantity of secondhand vehicles are favorable, private sales can present challenges for the uninitiated, whether buying or selling. “There are thousands of individuals who use our site to sell their cars privately and have done so for years, but if you aren’t familiar with cars or the process, there are some pitfalls to beware of. From the selling side, there are obviously risks associated with dealing with large amounts of cash as well as the ordinary risk of transacting with individuals you don’t know. From the buying side, you might not have the technical know-how to determine whether or not the car has undisclosed faults or been damaged in an accident. Because these deals aren’t protected by the Consumer Protection Act, the new owner will have very little legal recourse after the purchase to demand repairs.
“There are also other considerations. What if the owner hasn’t settled financing at the bank, or in the worst case scenario, what if the vehicle was stolen? How does one approach financing for a private deal? Or transfer ownership? The administration can be mind-boggling if you haven’t actually completed such a deal in the past.”
Osborne says that these factors have spurred the demand for private automotive sales facilitation, such as the Motofinn solution endorsed by Gumtree. “We’ve formalized our relationship with Motofinn in July not only because the demand for assistance grew significantly, but because of our greater strategic focus on continuously improving the automotive offering on our site. This service not only takes care of the administration surrounding a private car deal – it also ensures that the seller receives their payment in full and that the buyer is assured that the vehicle is cleared mechanically, legally and financially before purchase.”
Andrew Sutherland of Motofinn says that the solution was born out of a need for safety as well as convenience from both buyers and sellers. “Buyers and sellers are being steered towards the informal motor trade due to financial pressure, but they would still be willing to pay a small fee for the benefits that have traditionally been limited to professional dealerships alone. Financing, a full HPI check, secure payments, a full service history, police clearance, administration – all of these services can be accessed easily and without delaying the transaction.”
Osborne says that while numerous of these verified transactions have taken place, they expect that these are only the “tip of the iceberg”. “At the current rate, making use of third party facilitator could very well become the norm for private sales. In many ways South Africans are pioneers when it comes to implementing and discovering safety solutions for the private classifieds market. We do, however, urge customers to only make use of endorsed services that have the backing of respected industry bodies. In Motofinn’s case, this includes DEKRA Automotive, TransUnion and Deloitte.”
ABOUT JEFF OSBORNE
Jeff Osborne heads up the Gumtree Automotive Team from their office in Johannesburg. Jeff has decades of experience in the motor industry and served as the CEO of the Retail Motor Industry for 13 years. Jeff is passionate about the automotive space, and is a keen classic car collector.