The latest analysis points to progress that is selective rather than broad-based, with areas of strength alongside pockets of vulnerability. Vehicle finance has emerged as one of the clearest indicators of how improving affordability is translating into real economic behaviour.

This is according to a webinar held by TransUnion South Africa under the theme ‘Reading the Recovery: South Africa's Credit Landscape’ during Q4 of 2025.

The data highlights that while broader credit trends remain cautious, vehicle finance is demonstrating rare alignment between demand, affordability and repayment performance. In a market still shaped by constrained household finances and selective borrowing, this segment is becoming a leading signal of sustainable growth.

The wider environment remains complex. Household sentiment has improved, with seventy-two per cent of South Africans optimistic about their finances over the next year, and many expecting income growth. Yet this optimism is tempered by behaviour that remains measured rather than aggressive.

Consumers are managing their finances carefully, with more paying down debt faster and fewer increasing their use of available credit. This shows that households are still managing their finances with caution.

At the same time, reliance on short-term and flexible credit options has increased, reflecting ongoing pressure on day-to-day cash flow. Demand across credit products is therefore shaped by affordability and structure, with growth returning only in areas where these conditions are clear.

Vehicle finance has ended the year on a notably strong footing. Originations increased by nearly ten per cent year on year, supported by improving affordability and softer new vehicle price inflation.

Balances are growing faster than account volumes, with the average balance per account rising by around 5.7 per cent. This indicates that consumers are not simply taking on more accounts but are comfortable with slightly higher commitments, reflecting confidence not just in access to credit but in the ability to sustain repayments.

Performance has also strengthened across the board, with delinquency rates continuing to decline at both account and balance level, pointing to a healthier borrowing mix and deals that are being sized more appropriately for repayment capacity.

A key driver of this momentum is the changing pricing dynamic between new and used vehicles. New vehicle inflation has slowed significantly, while used vehicle prices have been in deflation. This has altered the value equation for consumers, with decisions increasingly based on total cost of ownership rather than purchase price alone.

New vehicles, often bundled with warranties and service plans, are becoming more attractive relative to used alternatives. Consumer behaviour is adjusting accordingly, with new vehicle registrations strengthening while used vehicle activity remains largely flat. This shift is feeding directly into lending patterns, tilting the mix of financed vehicles towards new models, which carry higher ticket values and push average loan sizes higher even in a low inflation environment.

Lenders are responding to this growth not by loosening credit standards but by adjusting deal structures to maintain affordability. Loan terms are extending, with more than fifty-six per cent of new vehicle loans now exceeding seventy-two months. This allows borrowers to manage monthly repayments even as overall loan values increase. The trade-off is clear: lower ownership costs are balanced against longer exposure periods, which supports affordability in the short term but increases sensitivity to risks such as negative equity over time. Rather than a simple rebound, what is emerging is alignment, with consumer demand, pricing conditions and financing structures moving together in a coordinated way.

Another notable trend is the growing role of younger consumers. Generation Z now accounts for over twenty per cent of vehicle finance originations, while millennials continue to anchor the market.

This signals that demand is broadening, but importantly, it is not being driven by increased risk-taking. The overall risk mix has remained relatively stable, indicating that lenders are maintaining discipline even as they expand access.

Younger buyers are entering the market earlier, supported by better affordability and very low new vehicle inflation, while lending standards remain intact. This combination of youth-led demand and controlled risk is a defining feature of the current cycle.

The strength in vehicle finance stands in contrast to other areas of credit. Unsecured lending, particularly non-bank personal loans, continues to show elevated arrears and signs of strain. Retail credit is stabilising, but growth remains driven by existing customers rather than new demand.

Across the broader market, risk is concentrated in specific segments, particularly those linked to short-term liquidity needs. Vehicle finance, by comparison, reflects more structured borrowing behaviour, closely tied to long-term commitments where affordability, stability and repayment capacity are more clearly defined.

Taken together, vehicle finance provides one of the clearest signals of where the market is heading. It shows what happens when affordability improves, lending remains disciplined and consumer confidence translates into action.

The broader takeaway is that growth opportunities are real but not uniform. As the report concludes, the opportunity in 2026 is not simply about lending more, but about lending better. In that context, vehicle finance stands out as a segment where this principle is already being applied successfully.