Cars are just so expensive these days, aren’t they?
My husband is currently in the market for a new car and you would think with me being a motoring journalist and all, it would be an easy task. Well let me tell you, it is not! The process is not the issue, the pricing of cars is. I remember when he bought his current car about five years ago, back then his brand new Polo cost around R220 000. To buy the equivalent new Polo now will cost R287 000. When you look at it, that isn’t exactly a massive jump over five years, but for some reason, it really feels like it.
According to a report by TransUnion Vehicle Pricing Index (VPI) for Q3 2019, new cars sales has seen a decline despite new vehicle price increases staying under inflation for the past two years – which is the longest consecutive period since the creation of the index in 2000. Used vehicle price increases have slowed, which is indicative that the used market is also taking the strain.
FINANCING AND STUFF
Despite lower price increases, the number of new vehicles financed in Q3 fell 7% compared to the same period a year ago, while the number of used vehicles financed showed a 1% increase. This is not surprising, I guess, when you consider that just about everything else has soared in price…has anyone else noticed the fewer bags of groceries one can buy with the same amount of money a year ago? Two minute noodles anyone?
Head of Auto Information Solutions for TransUnion Africa, Kriben Reddy, said the sluggish market reflected ongoing low consumer and business confidence, reiterating the weak domestic demand conditions. Although interest rates fell by 25 basis points in July, which offered consumers additional spending power, many consumers have opted to delay vehicle purchasing decisions due to the ongoing economic uncertainty.
“The bad news for the industry is that local market conditions are not likely to change in the foreseeable future. The industry is trending in a downward direction, and unless certain structural changes take place in the economy, the picture is not going to change for the local auto industry,” said Reddy.
WHAT TO DO? WHAT TO DO?
The best option is to probably opt for a second hand car. My husband is looking at demo models. The VPI report shows the used-to-new vehicle ratio increased from 2.08 in 2018 Q3 to 2.26 in 2019 Q3, which means that 2.26 used vehicles were financed for every new vehicle financed. The make-up of used vehicle sales is also shifting, with 36% of used vehicles financed under two years old, with 6% of those being ex-demo models – which indicates consumers are opting for older vehicles as pressure on disposable income increases. Yup, the pressure is real people!
“The percentage of cars (new and used) being financed at key price points – below R200 000, R200 000-R300 000 and over R300 000 – has been fairly consistent over the last six quarters. This shows that consumers’ purchasing power and their ability to purchase more expensive vehicles is not changing,” said Reddy.
ARE YOU BUYING OR SELLING?
The one part of this whole car buying process that can be a bit of a pain, is selling your current car so that you can afford to buy the new one, obviously. But it can be tricky! How do you know how much you should be getting for your current car? What is the trade-in value etc. A flippen cool app to help you with that is First Check. It will tell you all the info you need for selling and buying a car. Things such as vehicle market value and extras, theft and ownership details and even the current finance information on a particular car.
If you’re looking to buy a car, whether new or used, check out CARmag for some great deals.
Look, it is a huge amount of money to spend when buying a car and it is not a decision to take lightly. My poor husband has me constantly in his ear about all sorts of things to look out for. In fact, we are about to go a test drive a car right now because he knows he is not allowed to consider a car without driving it first. If you haven’t read any of my car buying tips, you need to. I can also be the nagging wife in your ear if you so choose. Just give me a shout on Facebook, Twitter, or Instagram.