South Africa’s economic environment is changing the way people finance their cars


South Africa’s new vehicle market showed signs of further growth in August, in line with the government’s decision to open up the country’s economy last month.

Data from the National Association of Automobile Manufacturers of SA (Naamsa) revealed that overall new vehicle sales volumes increased by 1,119 units in July to 33,515. This is 26.3% lower than in July. in August of last year, given that the July market was down 29.6% year-on-year.

“While this is by no means an immediate sign of recovery for the market, it is certainly a good sign of some stimulus,” said Lebogang Gaoaketse, head of marketing and communications at WesBank.

The change in volume in the market has come from the rejuvenation of government spending rather than consumer or business demand.

Growth of 63% and 82.5% in the passenger car and light commercial vehicle (LCV) segments of this sector represented 1,257 additional units compared to August 2019. The government chain represented 1,419 units in total, providing the bulk from momentum to market volume. growth over the month, Wesbank said.

Dealer channel sales – which represent the sales activity of consumers and businesses and the confidence levels that come with it – have shown small signs of recovery, the lender noted.

Passenger car sales through dealers were down 15.9% year-on-year from the 18.7% decline in July, while LCVs were down 21.1% from August of last year against 17.1% less in July.

In total, the passenger car segment recorded 19,545 sales, down 32.6% year-on-year. Light commercial vehicles sold 11,336 units in August, down 19.3% from August of last year. These remained largely in line with July’s performance in both segments.

WesBank said it continues to see an increase in fixed rate transactions thanks to the low interest rate environment. “A year ago, nearly two-thirds of WesBank’s financing deals were on tied interest rates. During the month of August, this split shifted towards a more balanced picture of fixed and tied rate agreements, ”said Gaoaketse.

The average value of a new funded vehicle has climbed to Rand 364,048, from Rand 332,161 a year ago, according to data from WesBank.

“With interest rates at their lowest, setting the rate on new financing deals is a good way to save money over the life of the contract,” Gaoaketse said.

“While consumers shouldn’t necessarily expect to enter into a current prime rate financing deal over a fixed rate deal, this is still a good opportunity to access some of the most affordable debt South Africans will experience. for a certain time. “

The new vehicle market continues to benefit from aggressive marketing offers from most vehicle brands, with several special offers available, WesBank said.

“Consumers should remain cautious about their level of debt, even if these offers seem attractive,” said Gaoaketse. He urged consumers to fully understand the terms of the finance offer, not just the amount set aside for lump sum payments, and to allow critical expenses, including insurance and maintenance, within their affordability.

Sales since the start of the year remain down 34.6% compared to the same period last year, indicating the very harsh reality of the effect of the pandemic. “To put this in perspective, the new vehicle market sold 120,960 fewer cars this year than last year,” Gaoaketse said.


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