JOHANNESBURG - The rate of new vehicle prices increases has dropped to its lowest level year-on-year since 2013 in the third quarter of the year.
The TransUnion’s latest vehicle price index yesterday revealed that the rate eased to 3.1 percent from 9.9 percent in the third quarter of last year.
Used car prices in the same period increased from 2.8 percent last year to 3.6 percent, the highest rate of increase since 2012.
Derick de Vries, the chief executive of Auto Information Solutions at TransUnion, said the figures suggested an about-turn in recent vehicle price index reports that indicated a growing preference among consumers for affordable, reliable and reasonably young used cars. De Vries said this may see new car purchases regaining some of their lost popularity.
A lower vehicle price index indicates slower pricing increases and therefore greater relative affordability for the consumer. De Vries said the cyclical nature of the automotive industry was the main impactor and reason that this trend was most likely to stay for a while.
“Used cars have been performing well for the last few years, and as a result, less people have been opting for new vehicles.
“Less new vehicle purchases mean less vehicles to resell to dealers, a dwindling availability of quality used cars, and that dealers can thus charge more for them.
An Audi Aicon concept car is unveiled on the stand of Volkswagen during the first media day of the International Frankfurt Motor Show IAA in Frankfurt, Germany, Tuesday, Sept. 12, 2017, which runs through Sept. 24, 2017. From frighteningly fast hypercars to new electric SUVs, the Frankfurt auto show is a major event for car lovers wanting to get a glimpse of the future. (AP Photo/Martin Meissner)
“In other words, new car sales are what inevitably feed the used car industry, and so the performance of the two are inextricably linked by the rules of supply and demand,” he said.
The quarterly index draws data from a selection of South Africa’s most popular passenger vehicles from 15 volume manufacturers and examines the link between the year-on-year price increases for both new and used vehicles,
De Vries said the continuing trend towards greater affordability followed a slowdown in new vehicle prices in the second quarter. He said the surprising affordability of new cars was symptomatic of slowing sales, with manufacturers and dealers going out of their way to tempt buyers by offering discounts, preferential interest rates and trade assistance.
Despite the delicate economic environment, manufacturers had also been able to steady their prices thanks to unexpectedly low inflation and interest rates, he said.
De Vries added that despite both the new and used vehicle markets enduring tough times of late, the overall outlook for both markets looked tentatively positive.
He said total vehicle financial agreements had increased by 9 percent in the last quarter alone and there was only a marginal difference between volumes for new and used vehicles. However, De Vries expected the trend towards used car purchases to continue until the end of the year or beyond.