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Cape Town - The latest TransUnion vehicle pricing index (VPI) Report should be music to the ears of consumers who had been itching to buy a new car but were unsure if they would be able to pay for it over the long term.

TransUnion’s Q2 2017 report showed that VPI for new passenger vehicles shrunk from 8.4 percent in last year’s second quarter to 5.4 percent in this year’s second quarter, while used vehicles increased from 2.7 percent to 3.6 percent over the same period.

The VPI, which measures the relationship between increases in vehicle prices (both new and used), considers data from South Africa’s top 15 manufacturers, comparing the rates at which both new and used financed vehicle prices increase on a quarterly basis.

Read also:  New, used car prices up, with dim outlook 

A VPI report released earlier this year revealed an increase in pricing for new vehicles to 8.8 percent in this year’s first quarter from 6.6percent in last year’s first quarter, while used vehicle prices rose to 3.7 percent from 2.2 percent in the same period.

Effectively the decrease means used cars are not necessarily the great deal they have been considered to be, while buying new cars is becoming easier and more affordable.

TransUnion attributed this to the availability of quality used cars, which fluctuated often, and with it, their prices. When used cars were in high demand and short supply - as we appear to be experiencing - the option of buying a new car instead could often amount to a better deal for the buyer.

Price increases

The company said that for the past 18 months, consumers had been faced with price increases at a rate well above the consumer price index, but the latest VPI showed a promising end to this trend.

The VPI showed that 44 percent of used vehicles sold were under two years old - strong evidence that South Africans were finding better value in younger, well-maintained used cars than they were in financing new ones.

In response, dealers and manufacturers were bolstering their vulnerable positions with all manner of marketing efforts to boost sales.

TransUnion’s Q2 2017 report showed that finance deals on new passenger vehicles declined 12 percent over the same period, while deals on used vehicles increased by 15 percent.

Total financial agreement volumes between manufacturers and dealers dropped by a sharp 14 percent between the first and second quarters, in anticipation of the period of slow sales on new cars ahead.

TransUnion said despite the country’s recent political and economic uncertainty, interest rates had remained fairly stable and the rand was performing surprisingly well.

“And while there is no telling what could change over the next few months or years, those consumers who manage to secure a fixed (rather than linked) interest rate when financing their cars are unlikely to be able to do better than they can right now.”

It said that as quality used vehicles were going through a period of high demand, their newfound popularity was also bound to drive prices up somewhat. From discounts and favourable repayment terms to trade assistance and other incentives, manufacturers were under increasing pressure to provide value to buyers.

This put them in a strong position to negotiate a better deal on new vehicles “and we anticipate a sharp increase in the sale of new vehicles in upcoming months, along with a marginal decrease in used car sales as the quality of supply diminishes”, TransUnion said.