File image:TransUnion head Kriben Reddy says the lower price index on vehicles indicates slower pricing increases and therefore greater relative affordability for consumers. (Photo: AP).
JOHANNESBURG - Price increases in both new vehicles and used vehicles declined in the first quarter of this year.

The latest TransUnion SA vehicle pricing index released yesterday revealed that the rate of new car price increases dropped to 2.3% from 2.4% in the fourth quarter of last year and 8.8% in the corresponding quarter last year.

TransUnion said the rate had now declined below inflation for the third consecutive quarter. TransUnion head Kriben Reddy said the lower price index indicated slower pricing increases and therefore greater relative affordability for consumers.

Reddy said the pending VAT and fuel levy hikes last month led to a slight lift in demand in the first quarter as consumers looked to buy before the increases kicked in.

He said the reduction in interest rates, lower inflation, the strengthening of the rand and slow price increases from manufacturers all played important roles.

“Other positive factors included an improved political climate since the end of 2017 and a slight lift in consumer and business confidence,” Reddy said. “This move was therefore more than just trying to beat the VAT increase and it is very significant that new pricing is now below CPI (consumer price index) inflation.”

Reddy added that many dealers had chosen to absorb the VAT increases rather than passing them on via higher prices.

He said the hike did not come as a surprise as the industry had been building up towards the higher tax rate for a while.

TransUnion said the rate of increase in used vehicle prices dropped to 2.9% in the first quarter of this year from 3.5% in the previous quarter and 3.7% in the first quarter of last year.

Reddy said the extended period of rand weakness a year ago drove consumers to the pre-owned market, but the latest data showed that the pendulum was swinging back to the new vehicle market.

He said the used-to-new vehicle ratio created from the data, which was based on finance deals registered in the last quarter, indicated that finance houses were financing 2.09 used vehicles for every one new vehicle compared to 2.49 in the first quarter of last year.

Reddy said this followed the trend of the vehicle price index of slowing new car prices over the past three quarters.

He added that the underlying impetus of the recent trends was essentially the value proposition of new vehicle versus used vehicle and the fact that there was now a better climate for new cars, including the benefits of innovative financing structures like leasing and maintenance plans.

Reddy said the vehicle market probably bottomed some time last year and this sector was now on the rise, specifically in the new vehicle space.

But Reddy said the market was coming off a low base and was hovering around 450000 to 500000 new cars being sold a year.

“So we are still trying to get back to 2007 levels and clearly still have a long way to go despite all the positives,” he said.

- BUSINESS REPORT ONLINE