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JOHANNESBURG - The rate of increase in new car prices continues to decline and has now remained below the inflation rate for the second consecutive quarter.

Used vehicle price increases have now also overtaken the rate of increase in new vehicle prices.

The latest TransUnion vehicle price index released yesterday revealed that new vehicle prices increased by 2.4percent year-on-year in the fourth quarter of last year from 9.4percent in the corresponding quarter in 2016.

Used vehicle prices increased by 3.5percent from 3.3percent in the same period.

Kriben Reddy, the head of TransUnion Auto, attributed the decline in new vehicle prices largely to the stronger value of the rand in the second half of last year, which allowed manufacturers to reduce new vehicle price increases.

Manufacturers have limited price increases in an attempt to help vehicle dealers to sell more new vehicles.

TransUnion said consumers could take advantage of manufacturer marketing incentives, which included preferential interest rates, trade assistance and manufacturer discounts as well as the slowing down of price increases for new vehicles.

Reddy said the current market was experiencing the real effects of supply and demand.

He said demand was shifting from used to new as the supply of quality used vehicles declined and the demand increased and supported consistent increases in used vehicle prices.

“If we look at where we have come from, the weaker rand saw new vehicle prices increase above inflation in previous reports as input costs were higher.

“This significantly widened the pricing gap between new and used vehicles and shifted consumer demand more in favour of used vehicles.

“As we shift out of this market trend, we will see a change in consumer behaviour as they take advantage in the drop of new vehicle prices,” he said.

The index measures the relationship between the increase in vehicle pricing for new and used vehicles based on a basket of passenger vehicles, including 15 top volume vehicle manufacturers.

Reddy said the change from used to new vehicle purchases was also evident in the financing statistics.

He said banks financed 2.2 used vehicles for every new vehicle in the fourth quarter of last year compared to 2.5 used vehicles for every new vehicles in the corresponding quarter in 2016.

In addition, total financial agreement volumes in the passenger market increased by 9percent between the third and fourth quarters of last year, with new passenger vehicle finance deals increasing by 14percent and used passenger vehicle finance deals rising by 4percent in this period.

Of the used vehicles sold, 44percent were under two years old and 7percent were demonstration models.

- BUSINESS REPORT