South Africa's new vehicle market is witnessing a significant transformation as consumers opt for more affordable ownership options. According to TransUnion's Vehicle Pricing Index (VPI) for the third quarter of 2023, CEO Lee Naik highlighted a notable shift towards financially distressed consumers gravitating towards older, lower-cost used vehicles.
Alternative Financing Solutions
Naik pointed out that dealerships are offering substantial discounts, incentive packages, and longer loan terms to attract customers. Some dealerships are extending finance periods up to 84 months, a strategy aimed at making vehicle ownership more accessible. However, consumers need to carefully evaluate their financial situations before committing to longer finance periods, considering factors like depreciation rates and inflation.
Impact of Economic Constraints
Inflation and economic constraints are making vehicle ownership increasingly challenging for many South Africans. Lower-income consumers now constitute a smaller portion of financed vehicles, reflecting the affordability crisis. TransUnion's data also indicates a decrease in the number of financed vehicles and an increase in loan delinquency rates.
Market Trends
The market is shifting in favor of new cars, with the used-to-new ratio declining between Q3 2022 and Q3 2023. This trend is partially driven by rising used vehicle prices and attractive deals on new cars. Dealerships are responding to market forces by offering significant discounts on entry-level vehicles and adopting pragmatic pricing strategies to stimulate sales.
Dealer Strategies and Consumer Benefits
NADA Chairperson Brandon Cohen highlighted dealers' adoption of pragmatic strategies to adjust final sale prices, often diverging significantly from the list price. This depth of pricing strategies benefits consumers, as they gain access to unprecedented opportunities in the market. Cohen emphasized that the market is evolving, and consumers are reaping the rewards of these strategies.
