New vehicle prices increased by 2.5% year on year in the fourth quarter of 2018 and were below the inflation rate for the sixth consecutive quarter. File Photo: IOL

PRETORIA – New vehicle prices increased by only 2.5 percent year on year in the fourth quarter of last year and were below the inflation rate for the sixth consecutive quarter, according to the latest TransUnion SA vehicle pricing index.

Kriben Reddy, the head of Trans Auto in South Africa, said yesterday that there was a small increase in the rate of growth in new vehicle prices in the fourth quarter from 2.4 percent a year earlier.

“It’s a very marginal increase, but I think it’s starting to swing the other way.

“Previously there was a strong swing towards used vehicles, because higher-than-inflation price increases on new vehicles pushed the consumer market towards used. I think the cycle is going to turn back that way,” he said.

Reddy said there was a marked decrease in the rate of increase in used vehicles to 1.6 percent in the fourth quarter from 3.5 percent in the same quarter in 2017.

He said consumer price inflation was at 4.5 percent year-on-year in December after reaching a high of 5.2 percent in November last year.

“Used vehicle pricing is probably at the lowest it has ever been, which will also start to make the used vehicle side more appealing and attractive again,” he said.

Reddy added that with the market more focused for several quarters on new vehicles, there was also likely to be a good flow of quality used stock to the market.

TransUnion revealed that new car finance deals decreased by 7 percent year-on-year in the fourth quarter while used car finance deals slumped by 15 percent. This resulted in the ratio of used to new vehicle sales decreasing to 2.03 used for every new vehicle in the fourth quarter from 2.22 used vehicles for every new vehicle sold in the same quarter in 2017.

Reddy said that the recent strength of exchange rate of the rand would help vehicle manufacturers keep pricing below consumer price inflation, but the vehicle market started to grow when GDP growth was around 1 percent or greater.

Total new vehicle sales grew by 1 percent to 552 190 units last year. The National Association of Automobile Manufacturers of South Africa has forecast a 3.9 percent growth in new vehicle sales to 351 154 units this year.

BUSINESS REPORT