Roy Cokayne
THE rate of increase in new car prices fell in the fourth quarter of last year after seven consecutive quarters of year-on-year price inflation, but the price hike still exceeds the consumer inflation rate.
Statistics released by TransUnion Auto Information Solutions yesterday revealed the rate of increase in new vehicle prices declined to 7.18 percent in the fourth quarter of last year from a 7.82 percent increase in the third quarter.
Keith Dye, the TransUnion Auto Information Solutions chief executive, said the decline in year-on-year vehicle price inflation was minimal and could largely be attributed to a degree of stability in foreign exchange rates over the period.
Dye added the fact the rate of new car price inflation remained above the consumer price index (CPI) was indicative of an economy that was still beset by challenges, which lowered demand for both new and used vehicles.
New vehicle inflation last year averaged 7.15 percent compared with 3.8 percent in 2013 after declining each year between 2009 and 2012 following the average 10.6 percent peak reached in 2009 caused by the economic impact of the global financial crisis.
The rate of increase in new vehicle prices has increased every quarter since rising to 2.4 percent in the first quarter of 2013 from 2.1 percent in both the third and fourth quarter of 2012. Dye said fluctuating exchange rates would continue to have the greatest impact on pricing and ultimately the new and used vehicle market this year.
Rudolf Mahoney, the head of research at WesBank, said increases in new car prices continued to exceed headline CPI, resulting in a significant price gap between new and used cars, with more consumers opting to finance used cars.
Mahoney said the ratio of used to new cars financed by Wesbank had moved from 1.12:1 in September 2012 to 1.44:1 in December last year, indicating a 23 percent growth in favour of used vehicles over the long term.
However, TransUnion revealed the trend towards the purchase of used rather than new vehicles from the first to the third quarter of last year reversed again in the fourth quarter.
TransUnion said its records of financial registrations showed the ratio of used to new vehicles declined to 1.79 used vehicles for every new vehicle registered in the fourth quarter from 1.81 used vehicles for every new vehicle registered during the previous quarter.
But TransUnion said this ratio had not yet reached the lows of 1.25 at the end of December 2013 and 1.52 in the first quarter and 1.65 in second quarter of last year.
Dye said the decline in the fourth quarter was not material and may result from the purchasing patterns of car rental organisations, which tended to refleet their operations during the last quarter of the year and inflated the number of new cars sold relative to used cars.
The latest TransUnion vehicle pricing index also indicated an unusual trend in that used car prices were tracking new car prices, which was indicative of a slight softening of the used car market relative to new vehicles.
Dye said used car price trends historically tended to lag new car price changes and there was generally an increase in used car prices only a few months following new car pricing inflation.
In addition, year-on-year used car inflation has increased for the fourth consecutive quarter, rising by 1.36 percent between the fourth quarter of 2013 and the fourth quarter of last year after experiencing five straight quarters of year-on-year price deflation from 2012 to 2013.