Bad news for motorists: Vehicle prices set to increase - TransUnion SA

[FearLess]

Cape Town - The South African motoring industry faced yet another challenging quarter, according to the latest TransUnion SA Vehicle Pricing Index (VPI) for used and new vehicle sales.

The Q3 2016 VPI found that the rate of new and used vehicle pricing increased further to 9.9% and 2.8% in Q3 2016 from 8.4% and 2.7% in Q2 2016 respectively, which suggests used car sales volumes will continue to rise. 

The VPI measures the relationship between the year-on-year increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles which incorporates the top 15 volume manufacturers. Vehicle sales data collated from across the industry was used to create the Index.

Weakening rand

According to the report, the further increase of new vehicle prices can be attributed to a delayed reaction to the rand weakness and ongoing poor economic conditions.

Derick de Vries, CEO: Auto Information Solutions at TransUnion, said: “The ongoing recession in the domestic new vehicle market, combined with an extremely difficult economic environment points to an unfavourable short to medium term outlook.

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“Household cash flow measures show that it is the weakest it’s been since 2010 and is reflecting no room for consumers to take on additional debt. Low levels of both consumer and business confidence combined with new vehicle pricing remaining above CPI (Consumer Price Index) will continue to add severe pressure to the new vehicle market.

"This has however seen the demand for used vehicles continue to increase considering the affordability challenges in the new vehicle market.

“Consumers tend to look for cheaper cars or hold on to their existing vehicles for longer than normal. This yearly trend continues with a new to used vehicle ratio of 2.93 in Q3 2016 as compared to 1.71 in Q3 2015. This means that for every one new vehicle financed, there were 2.93 used vehicles financed.”