TransUnion SA says this preference was driven by used vehicle prices rising by only 0.6% year-on-year in the second quarter, which was well below the rate of inflation.

In the same period, new vehicle prices rose by 4.4%, suggesting the market is under strain and that affordability remains a priority. The ratio of used to new vehicles financed moved to 1.44 used vehicles for every new vehicle purchased from 1.15 used vehicles for every new vehicle purchased in the first quarter of 2024.

TransUnion SA says the vehicle market’s affordability crisis deepened in the second quarter of 2024 as consumers faced ongoing pressure from high interest rates, inflation and stagnant wages.

It says the average loan value for financed vehicles rose slightly in the second quarter of 2024 to R400 000 from R391 000, reflecting the ongoing financial pressures on consumers despite this increase being lower than both vehicle price inflation and the Consumer Price Index (CPI).

TransUnion SA says many consumers were priced out of the new vehicle market, increasing reliance on used cars.

In addition, it says the number of new vehicle asset finance (VAF) accounts has dropped to its lowest point since the second quarter of 2020 and 7 320 fewer financed vehicles than last year, highlighting the enduring effects of ongoing economic challenges.

This marks the fifth consecutive year-on-year decline in VAF accounts although the total account balance for VAF has grown 16% since the second quarter of 2020, driven by larger loan amounts owing to higher interest rates.

However, TransUnion SA’s auto information services sales president, Marcia Mayaba, says despite the contraction in vehicle financing, delinquency rates have remained consistent.

Mayaba says this stability suggests that although fewer new accounts are being opened, those within the system are maintaining their repayments, reflecting the sector’s resilience in managing defaults even as it navigates a challenging economic environment.

“Affordability remains a major concern but there is an opportunity to foster financial inclusion by expanding product offerings.

“Subscription models, vehicle-on-demand services and tailored financing solutions for low-income consumers could help reverse the decline in new VAF accounts,” she says.

Looking ahead, the TransUnion SA report highlights the growing potential of electric vehicles (EVs) in South Africa.

Mayaba says while EV sales still represent a small percentage of total vehicle sales, there is optimism about future growth, especially as global trends indicate a shift to more sustainable transport options.

“The adoption of EVs is inevitable, particularly as younger, environmentally conscious consumers drive demand.

“While the initial uptake has been slow owing to higher costs and limited infrastructure, improvements in battery technology, the expansion of charging networks and potential government incentives are set to accelerate this shift,” she says.

President Cyril Ramaphosa told the SA Auto Week conference in Cape Town last week that consideration must be given to incentives for manufacturers as well as tax rebates or subsidies for consumers to accelerate the uptake of electric vehicles (EVs) but did not provide any timescale for the implementation of these incentives.

Mayaba says comparing South Africa to markets like Europe and China, where EV adoption is rapidly increasing, highlights the room for growth in South Africa.

But Mayaba says for this to happen, more affordable EV models should be made available while financing options tailored for the younger generation will be essential to help push EV sales forward.

“Increased focus on sustainable transport, together with expanding infrastructure and growing consumer awareness, position EVs as a key component of South Africa’s automotive future.”