File picture: Newspress.

Johannesburg - South African new and used vehicle price increases continue to trail general inflation, according to the Vehicle Pricing Index released by TransUnion.

The index reveals that new vehicles prices showed an annual increase of 2.5 percent during the fourth quarter of 2018, versus 2.4 percent in Q4 2017, while used vehicle inflation slowed to 1.6 percent in the last quarter of 2018, from 3.5 percent a year earlier.

Both were well below the general consumer price inflation of 4.5 percent recorded for the final quarter of last year.

“Challenging economic conditions have seen manufacturers reduce the price of new vehicles in real terms as a way of stimulating sales,” TransUnion Africa head Kriben Reddy said.

“It is important to consider the overall cost of owning a vehicle, not just the purchase price. Factors such as household disposable income and consumer confidence are also part of the changing dynamics of the vehicle market."

Market to remain under pressure

Also worth noting was that overall consumer confidence is holding steady at present, according to data released in January, following a significant deterioration in confidence levels across all income levels was noted in November last year.

This is pushing buyers into more affordable cars, says TransUnion, with the percentage of new and used vehicles being finance below R200 000 now standing at 37 percent, up from 36 percent in the previous quarter.

The vehicle market as a whole, however, is not expected to show meaningful growth anytime soon.

“Unless broader economic growth is stimulated, the automotive sector won't see a significant improvement in the near term,” Reddy added.

“There are only so many levers manufacturers can use to stimulate market demand, including pricing, marketing incentives, trade-in assistance and tools such as residual value that can ease the pressure on consumers’ cash flow.

“However, measures such as residual value can add up over time and push consumers out of the buying cycle. At a dealer level, there are indications that the market is swinging toward used vehicles, which tend to have a larger margin than new vehicle sales.”

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