Used cars in SA are continuing to get more expensive as supply remains under pressure with motorists opting to keep their vehicles amid a shortage of semiconductors.
According to TransUnion Africa, the average vehicle price index (VPI) for used cars jumped 8.3% in the second quarter of 2022, higher than the 5.9% inflation rate and a sharp rise over the 4.9% recorded in the same period a year earlier second quarter of 2021.
However, prices increases for new vehicles continue to lag inflation with that index rising to 3.9% compared with from 6% over the same periods, says Kriben Reddy, TransUnion Africa’s vice-president of auto information solutions.
The VPI measures the relationship between the increase in vehicle pricing for new and used vehicles across 15 brands.
The scarcity of used cars results from a constrained supply of new vehicles due to the global shortage of semiconductors, which has caused many consumers to hold onto their existing cars longer while waiting for their preferred new vehicle to become available.
Reddy said SA’s automotive industry continued to recover from Covid-19 in the second quarter of 2022, with the number of sales reaching levels last seen before the pandemic struck. Financing deals for new vehicles soared 34% year on year, compared with a 5.4% increase for used cars.
As a result of these pricing trends, the ratio of used to new vehicles sold shifted significantly in the past quarter, says Reddy. A year ago, 2.67 used vehicles were sold for every new vehicle; in the second quarter of 2022 it declined to 2.1. In the used vehicle market, 27% of cars sold were less than two years old, and continues to decrease as a result of a fewer quality used vehicles in the market.
Consumers continue to look for value in the used-vehicle market, TransUnion Africa said, and the recent interest rate hikes haven’t affected the numbers of consumers looking to purchase yet. However, the group, which offers commercial, consumer, insurance and vehicle risk information across the continent, said lagging indicators such as rising interest rates could still affect the industry.
“The market is heading in the right direction, but we have to remember that a year ago we were in the midst of level four lockdowns and civil unrest, which depressed the market severely,” said Reddy. “We’re also almost certainly going to see the impact of rising inflation and interest rates at a time when household incomes are not growing at the same levels.”
Buying trends
Consumer buying patterns show that one in three new and used vehicles bought with financing are hatchbacks, while one in five are SUVs, according to TransUnion Africa. Sedans have retained their market share, though this is mainly in the used-vehicle market, where supply is constrained. Consumers between the ages of 26 and 40 bought nearly half of all vehicles financed, of which most were used.
Buyers were spending more on cars, and the percentage of cars (new and used) being financed showed a clear move from under R200,000 to the over-R200,000 bracket.
High fuel prices are also affecting car buying patterns. Online car portal AutoTrader reports that fuel type is becoming a factor in car searches, with searches for hybrid and electric cars trending upward between January and April 2022, from 102,000 to 118,000 (hybrids) and from 66,500 to 80,400 (electric cars).