South African consumers face growing pressure on household finances after the South African Reserve Bank raises interest rates, adding to a range of rising costs that are already influencing vehicle purchasing decisions.
The Monetary Policy Committee increases the repo rate by 25 basis points to 7.25%, resulting in the prime lending rate moving to 10.75%.
The increase comes as consumers continue to contend with elevated living and mobility costs. Headline consumer inflation edges up to 4.4% in August from 4.3% in July, adding to an affordability environment already shaped by higher fuel and household expenses.
“While we understand the inflationary pressures behind the decision, another increase in borrowing costs is difficult news for consumers, particularly when affordability is already influencing vehicle purchasing decisions,” says Brandon Cohen, chairperson of the National Automobile Dealers’ Association (NADA).
According to the Competition Commission’s latest Cost of Living Report, petrol prices increase by 26% between January and July 2026, while electricity and water costs also rise well ahead of inflation.
“Consumers are not dealing with higher interest rates in isolation. Vehicle finance, fuel, insurance, vehicle licensing fees, electricity, food and other essentials all compete for the same disposable income. It is the cumulative impact that ultimately determines what households can afford,” Brandon says.
The pressure is already influencing purchasing behaviour. Recent TransUnion research shows vehicle purchase intent declines from 22% to 19% between the first and second quarters of 2026 as affordability concerns intensify.
Despite these challenges, underlying demand for mobility remains evident. New vehicle sales reach 57 898 units in August, up 11.4% year on year, indicating that consumers continue to prioritise personal transport.
“That contrast is important. Consumers still need vehicles, but they are becoming much more deliberate about what they buy and how they finance it. We expect an even greater focus on value for money, fuel efficiency, quality pre-owned vehicles and the total cost of ownership,” Brandon says.
He states that the full effect of the latest rate increase on vehicle purchasing behaviour is likely to become clearer over the next 60 to 90 days as consumers reassess household budgets and finance commitments.
“Dealers are seeing these shifts first-hand and are well placed to help customers find vehicles and finance structures that meet their mobility needs while remaining sustainable within household budgets,” Cohen says.
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