This is how much South Africans are spending on a new car right now

TransUnion has released its latest Vehicle Pricing Index (VPI), showing that the South African car market is under sustained pressure in the second quarter of 2023 as the effects of fuel hikes, Inflation, challenging economic conditions and load-shedding took their toll.

The index measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles incorporating 15 top-volume manufacturers.

TransUnion’s data showed that the South African vehicle market faced significant challenges as it grappled with slower demand and tightening credit supply. Total financial agreement volumes in passenger vehicles decreased by over 6% from Q2 2022 to Q2 2023.

This decline, the group noted, results from low economic growth, frequent power cuts and decreasing disposable incomes, creating a negative sentiment in the South African vehicle market, making it difficult for industry players to generate demand.

“The vehicle market remains in a state of flux due to frequent power cuts, ongoing increases in the repo rate and various other factors influencing the total cost of vehicle ownership. These factors continue to exert downside pressure on consumer and business confidence, negatively affecting vehicle demand,” noted the report.

The group added that rising vehicle prices and diminishing disposable incomes made it challenging for consumers to purchase vehicles, resulting in motorists holding onto their cars for longer, which led to a shortage of high-quality used vehicles.

“With a shortage of quality used stock, consumers are increasingly gravitating toward older used vehicles or repairing current vehicles. This creates opportunities for businesses focusing on refurbishment and repairs and alternative mobility solutions providers,” it said.

The TransUnion VPI report shows the used-to-new ratio declined YoY from 2.1 in Q2 2022 to 1.8 in Q2 2023, indicating the mentioned limited access to quality used vehicle stock. Financed demo models remained at 3% in Q2 2023, which also may indicate a lack of supply.

According to the report, the price of new vehicles, on average, increased by 6.7% in Q2 2023.

Although this is already slightly above inflation (CPI), TransUnion noted that this is forecasted to increase further in the upcoming months.

The price increases in three segments exceeded CPI,  and the price of all new vehicles is forecasted to increase in the coming months, noted the report.

On average, the price of all body types increased over the period, with medium SUVs and hatchbacks seeing the steepest increases at 7.4% in Q2 2023. Other YoY price increases included: Small SUVs (6.8%), premium and hybrids (6.6%), Crossovers (6.4%), and Electric (3.1%).

Adding to the challenges of owning a car is that used-vehicle prices have experienced, on average, a more significant increase than new cars, with the report recording a price increase of 9.8% in Q1 2023 (3.5% above inflation).

TransUnion SA noted that this resulted from car owners holding on to their vehicles for longer due to financial pressures, leading to a shortage of high-quality used cars.

Interestingly, the report also showed that older cars (three years old) showed an even greater price increase – with prices rising between 15.8% and 19.6%.

According to the report, the percentage of cars – both new and used – being financed below R200,000 declined to 19% in Q2 2023 from 21% in Q2 2022, likely due to the increased average purchase price of new vehicles, leaving little choice for prospective buyers in this price band.

The under R200,000 band is the lowest it has been since TransUnion started the VPI in 2011.

The data further found that 28% of vehicle financing deals were for cars between R200,000 and R300,000, and 53% shopped for cars over R300,000. The report noted that this is a result of rising vehicle prices, with consumers forced to spend more for a reliable vehicle, while those in the used vehicle market moved to older cars to meet their needs.

“The average loan size for Q2 2023 increased from R370,000 to R390,000 YoY, reflecting shifts in both new and used vehicle pricing and changes in buying preferences. In the search for value, consumers have turned to SUVs — which make up more than 30% of new and used financed vehicles.

“These trends suggest consumers are becoming more discerning as they seek value in a challenging market,” the report said.

Read: All the automatic cars you can buy under R280,000 in South Africa right now