The overall confidence levels of vehicle dealers about sales activity surged in the first quarter to the highest level on record, the latest WesBank vehicle sales confidence indicator showed yesterday.

Despite still high levels of household debt relative to disposable income, the indicator also confirmed the shift in vehicle buying patterns to new vehicles from used vehicles.

The indicator, launched in 2007, revealed that overall confidence levels in sales activity on dealer floors grew to 6.5 on a 10-point scale last month from 5.7 in October last year.

Fifty-nine percent of dealers surveyed last month reported that sales activity was either “active” or “very active”, compared with only 30 percent in the fourth quarter of 2010.

Chris de Kock, the executive head of sales and marketing at WesBank, said the greater confidence reflected improved performance of the vehicle market and better dealer profitability.

National Association of Automobile Manufacturers of SA figures revealed that 45 135 vehicles were sold last month, compared with 38 075 in January last year and 32 963 in January 2009.

The improved confidence and activity levels are being driven by the new vehicle market, with the indicator revealing that 57.7 percent of dealers reported last month that the new vehicle market was more active than the used vehicle market, compared with only 14.6 percent in October.

Conversely, the percentage of dealers who said the used vehicle market was more active than the new vehicle market declined from 61 percent to 29 percent in the same period.

De Kock said this shift in buying patterns was confirmed by WesBank’s vehicle loan book and since October the bank’s new to used ratio had increased from 1.91 used cars for every new car financed to 1.51 used cars to each new car.

The combination of a strong rand, interest rates at a 30-year low, rising used vehicle prices and increased new vehicle stock availability had led to new vehicles becoming more attractive to active consumers.

De Kock said WesBank’s vehicle finance approval rate had improved by 11 percentage points since October, which could be attributed to an improvement in the quality of applications received.

Applications for vehicle finance had risen from a low of 3 200 applications in the third quarter of 2009 to 4 350 applications in this year’s first quarter.

De Kock said the increased demand for credit was also evident from the number of credit applications registered at the National Credit Regulator, adding that the number of consumers with impaired records had reduced for the first time since June 2007 and the number of credit active consumers was continuing to grow.

Repossessions in WesBank’s loan book had also consistently declined since the fourth quarter of 2009, he said.

De Kock forecast the positive trend in the first quarter of this year would continue throughout this year and predicted moderate double digit growth in vehicle sales for the remainder of the year.

“We see no immediate interruptions on the supply side while consumers are on a good wicket on the demand side.”

Improved debt-to-income ratios compared with last year was another favourable factor that was likely to influence the upward trend in sales. - Roy Cokayne