Vehicle price inflation subdued, says TU

New vehicle inflation has declined to its lowest level since the fourth quarter of 2011.

Used vehicle parking lot Haidan Unsplash

The latest TransUnion SA Vehicle Pricing Index (VPI) revealed that the increase in new vehicle prices moved from 9.6% in the fourth quarter of 2020 to 2.0% in the fourth quarter of 2021.

The used vehicle index soared from 2.9% to 7.0% in the same period, which means used cars continued to get relatively more expensive in the face of changing consumer demand and supply.

Kriben Reddy, vice-president of auto information solutions for TransUnion Africa, says the last time the new vehicle index was at this level was in the fourth quarter of 2011, while the used vehicle index has not been this high since the first quarter of 2004.

The VPI measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles, which incorporates 15 top volume manufacturers.

The index is created using vehicle sales data from across the industry.

Reddy says the high demand for quality used vehicles, combined with limited supply, is directly driving the used vehicle pricing trends that are evident right now.

“Sourcing inventory has been a major issue, with consumers and fleets alike holding onto their vehicles for longer.

“With a long waiting list for new vehicles, consumers are opting for the used vehicle market, and prices are not going to ease soon, as interest rates remain relatively low, despite recent hikes,” he says.

Despite the new vehicle pricing trends, South African consumers continue to buy more used than new vehicles.

The used-to-new ratio stayed consistent year-on-year, with 2.31 used vehicles sold for every new vehicle.

Of the used vehicles, 33.0% are under two years old, and this continues to decrease as the supply of quality used vehicles remains under pressure.

The percentage of new and used cars being financed in the various price brackets saw activity moving from the under R200 000 bracket in the fourth quarter of 2020 into the R200 000 to R300 000 bracket in the fourth quarter of 2021.

TransUnion says this shows consumers are looking for value in the used vehicle market despite recent interest rate hikes.

Reddy says the car market is seriously affected by the macroeconomic outlook, with the economy contracting for the first time after four consecutive quarters of growth towards the end of 2021.

“Consumer confidence remains below zero, and the household debt-to-income ratio remains high, which puts significant pressure on consumers’ disposable income.

“As a result, many consumers will stay out of the new car market at this stage, despite its relative affordability,” he says.

TransUnion says overall the industry continues its slow recovery from the effects of the COVID-19 pandemic and the civil unrest experienced earlier in 2021.

It says total financial agreement volumes in the passenger market increased by 2.8% year-on-year, with new passenger finance deals up 2.6% despite the semiconductor shortage which has disrupted new vehicle supply chains.

Used passenger vehicle deals were up by 2.9%. Commenting on consumer buying patterns, TransUnion says 47.0% of new and used financed vehicles are hatchbacks while 25.0% are sport utility vehicles (SUVs).

It added that crossovers make up a higher proportion of new vehicles financed than sedans, which is indicative of consumers looking for multipurpose vehicles.

More Industry News stories

Fleets awarded, congratulated on road safety

Fleets awarded, congratulated on road safety

A local fleet manager walked away with the honour of being named the ‘first’ Best Fleet Manager in the country along with a R10 000 cash prize. Additionally, a South Africa organisation won the title of the Best Company based on their road safety policies.

  • 20 May 2022
Growth ahead, but with some restrictions

Growth ahead, but with some restrictions

The pace of recovery in the new vehicle sales industry outperformed expectations in the first quarter of 2022, according to automotive business council, naamsa.

  • 20 May 2022