Cash-strapped consumers switching to used carbank market, says WesBank

New vehicle sales saw a sharp decline in the first month of 2016, reflecting the current sentiment in South Africa’s economy.

001-off-my-wheelsBrian Joss – The latest consolidated sales data from the National Association of Automobile Manufacturers of South Africa (Naamsa) shows industry sales totalling 48 615 vehicles, a year-on-year decline of 6.9%.

Sales in all vehicle segments declined. Passenger car sales totalled 34 936, a year-on-year decline of 6.1%. Light Commercial Vehicle (LCV) sales declined 8.3% during the same period, with sales of 12 074 vehicles.

Simphiwe Nghona, CEO of Motor Division at WesBank. Picture: Motorpress
Simphiwe Nghona, CEO of Motor Division at WesBank. Picture: Motorpress

Vehicle sales through the dealer channel declined 12.6%, year-on-year, while government sales were down 27.4% for the same reporting period. In contrast, sales to the rental market saw massive growth of 49.6% in January 2016.

“The decline in new vehicle sales comes as no surprise in the current economic climate, with consumer and business confidence at very low levels as a result of a number of macroeconomic factors,” said Simphiwe Nghona, CEO of Motor Division at WesBank. “The spike in rental sales is an anomaly, most likely due to rental companies choosing to re-fleet ahead of new car price increases. Despite this positive activity in the rental market, total industry sales still saw a decline.”

WesBank’s data for January 2016 shows that 70% of all applications received were for used vehicles, with 30% of applicants looking to buy new. New vehicle finance application volumes declined 6.4%, year-on-year, while growth of 2.8% was seen in used car finance applications.

WesBank expects a continued shift to the used market throughout this year, as cash-strapped and budget-conscious consumers address affordability. Despite massive declines in the international oil price, consumers are unable to enjoy lower fuel prices due to the poor performance of the Rand.

“Consumers budgets will face increasing pressure this year in the form of rising interest rates and food-price inflation. While inflation is unavoidable, consumers who apply for credit can still take measures to accommodate future interest rate hikes,” said Nghona. “We have already observed more customers opting for fixed interest rates, which now account for 55% of all transactions compared to 49% in January 2015.”

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