Recent SARB 50 bp repo rate hike positive for used car dealers: WeBuyCars

The recent 50 basis point increase in the repo rate by the Reserve Bank took the prime interest rate to 11.25%, its highest level since 2009, which may negatively impact the new vehicle market in favour of used cars. Photo by Simphiwe Mbokazi 453

The recent 50 basis point increase in the repo rate by the Reserve Bank took the prime interest rate to 11.25%, its highest level since 2009, which may negatively impact the new vehicle market in favour of used cars. Photo by Simphiwe Mbokazi 453

Published Apr 11, 2023

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The recent 50 basis point increase in the repo rate by the Reserve Bank took the prime interest rate to 11.25%, its highest level since 2009, which may negatively impact the new vehicle market in favour of used cars, says Rikus Blomerus, Chief Marketing Officer at WeBuyCars.

The used car dealer said it was likely that the rate hike would exacerbate an already-stressed economic environment. “It may have a material effect on affordability of current and future new vehicle purchases and the ability for buyers to finance new deals, making the used car sector more attractive and attainable for consumers,” Blomerus said.

It continues to see strong interest from customers looking for value and selection in the used-car space, despite seeing a shift in buying patterns as a result of current economic pressures.

WeBuyCars said it was a buyer’s market with current low prices being good news for consumers who have become more price sensitive.

“Year-on-year the average used-vehicle price on WeBuyCars’ floors has dropped with about 21% due to a combination of factors, primarily the combined impact of socio-economic factors. As a result, prices have been decreasing due to the supply and demand of used vehicles. As customers are more price sensitive and the demand is low, it makes for ideal circumstances to now purchase a used vehicle,” Blomerus said.

“However, our volumes continue to grow and we are expecting March to be a record month as we forecast to sell 13 000 vehicles, clearly bucking national used car sales trend,” Blomerus added.

This was against a backdrop of NaTIS used vehicle registrations comparing last year and this year which show a 1.97% decrease year-on-year.

Blomerus said customers are focusing on affordability, downsizing to smaller cars and there was still strong interest in SUVs, as indicated by February statistics. Last year saw increases in prices for the vehicle makes Toyota Hilux by 32.28%, Ford Ranger by 32.21%, Ford EcoSport by 24.81%, Isuzu KB by 22.71%, and Toyota Fortuner by 17.64%.

At the beginning of this month, the Automotive Business Council said that the South African Reserve Bank (SARB) interest rates increase by 50-basis point to 7.75% repo rate and prime lending rate at 11.25% was already having an impact on a shrinking disposable income purse many consumers rely on when making new vehicle sales decisions.

Reflecting on last month’s vehicle sales, Naamsa CEO, Mikel Mabasa said for many South African households, buying a brand-new car was the second most-important investment. “The perceived continued increase in interest rates would likely have a negative impact on the already severely financially constraint consumers’ affordability to purchase vehicles and/or to service their car loan repayments.

Coupled with the effects of interest hikes and the Human Rights Day holiday, the new vehicle sales and exports sales modest performance were also impacted by the National Shutdown on 20 March 2023, as many dealers opted to close shop and vehicle manufacturers operating in hotspot metros also halted production during the shutdown.”

For the period under review, aggregate domestic new vehicle sales, recorded at 50 157 units reflected a decline of 308 units, or 0.6%, from the 50 465 new vehicles sold in March last year. Overall, out of the total reported industry sales of 50 157 vehicles, an estimated 43 801 units or 87.3% represented dealer sales, an estimated 6.1% represented sales to the vehicle rental industry, 4.1% to government, and 2.5% to industry corporate fleet.

For vehicles segmentation, the March new passenger car market at 31 631 units had registered decline of 2 157 cars, or 6.4%, compared to the 33 788 new passenger cars sold in March last year. The car dealer industry supported the new passenger car market for March this year and accounted for 85.9% of sales. Domestic sales of new light commercial vehicles, bakkies and minibuses at 15 529 units during March, had increased by 1 556 units, or 11.1%, from the 13 973 light commercial vehicles sold during March last year.

BUSINESS REPORT