Transport Month: The used car market a viable alternative

Dealerfloor poses a few questions to various role players in the automotive sphere on specific issues with the eye on Transport Month.

Transport month 1

We asked George Mienie, CEO, AutoTrader South Africa and expert of the automotive industry about the state of affairs in the used car market.

1. Has the used car sector stabilised in terms of more realistic prices with a steadier supply on the new vehicle side?

There are a few dependencies that impact the ‘realistic’ price of the used car market. Like any market, it is driven by supply and demand, and over time, inflation. We saw during the pandemic and post pandemic that a supply shortage of new cars led to an increase in the price of new cars, which led to more demand for used cars that evidently led to an increase in used car prices. In the last year, however, this increase in used car prices has stabilised and prices are “cheaper”. With that being said, price inflation has also added an additional costing.

2. What is the ratio between used vs new car sales currently and do you consider it to be a healthy one?

Right now the ratio is circa 1.8:1. With that being said, AutoTrader serves as a barometer for the used car market as a result of us having the largest network of used car dealers and supply of used cars in the country. Historically speaking, the ratio of used car vs new car sales has been over 2:1.

3. What segments in the used car market are under pressure and why?

  • Advert Views - Jan-Sep 2023:
  • Used Car Sales September 2023:
  • Dealership/Private Transaction Red Flags:
  • Vehicle Red Flags:

SUVs reign supreme in South Africa, with the body-type making up 30% of the top 18 body types on site in 2023 (Jan-Sep). The Body-Type under pressure but still contextually doing well are bakkies (this includes Double Cabs, Single Cabs, Extended Cabs and Super Cabs), despite the fact that the Toyota Hilux and Ford Ranger have been trading the top spot (excluding the Volkswagen Polo). Bakkies still sit behind SUVs, Hatchbacks & Sedans, making up a total advert view share of 13%.

Looking at September 2023 sales, a slightly different picture is painted though – SUVs still reign supreme making up a 35% share of sales, Bakkies make up 17% of sales, lagging behind Hatchbacks with 26% and within the top 4 the body-type selling least, are sedans with a 12% share.

This tells us that while many car shoppers want a sedan, they end up opting for a bakkie. This could be for many reasons, including the associated value a bakkie brings that still tick the sedan box (number of passengers, boot space, road clearance etc).

4. What is the influence of the economic pressure potential customers currently experience when it comes to choosing between a used or a new vehicle?

The economic pressure potential customers experience can significantly influence their decision between purchasing a new or used vehicle:

* Cost: Economic pressure often leads to tighter budgets. Used cars are typically less expensive, making them a more attractive option.

* Depreciation: New cars depreciate rapidly in the first few years. In a time of economic uncertainty, customers might prefer to buy used cars that have already undergone this initial depreciation.

* Insurance and Registration Fees: It is usually lower for used cars, which can be another attractive point for customers.

* Reliability: While new cars generally come with warranties and are less likely to require immediate repairs, the quality and reliability of used cars have improved significantly over the years. Many used cars also come with warranties, making them a safer choice.

* Financing: New cars often come with lower interest rates and better financing options. However, if a customer is under significant economic pressure, he/she might not qualify for these deals.

5. When buying used, what would be a red light for you in terms of a dealership/private transaction and the vehicle itself?

When buying a used vehicle, there are several red flags, both in terms of the dealership/private transaction and the vehicle itself:

Lack of Transparency: If the dealer or private seller is not willing to provide complete information about the vehicle's history, including previous owners, accidents and maintenance records, it's a red flag.

High-Pressure Sales Tactics: If the seller is pushing you to make a quick decision or seems overly eager to close the deal, take a step back.

Price Too Good to Be True: If the price is significantly lower than the market value, it could be a sign that there are hidden issues with the vehicle.

Poor Maintenance: Check the vehicle's maintenance records. Regular oil changes and other routine maintenance are signs of a well-cared-for vehicle. Neglected maintenance can lead to serious mechanical issues.

Signs of Major Accidents: While minor accidents are common, major accidents can cause significant damage that may not be immediately visible.

Mismatched Paint or Panels: This could indicate that the vehicle has been in an accident and had bodywork done.

Fluid Leaks: Check under the vehicle for any signs of fluid leaks. This could indicate a problem with the vehicle's engine or other systems.

Excessive Wear and Tear: While some wear and tear is normal, especially on older vehicles, excessive wear could indicate neglect or heavy use.

Remember, it's always a good idea to have a trusted mechanic inspect the vehicle before you buy. They can spot potential issues that you might miss.

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