MOTORING NEWS - TransUnion has reported in its first quarter 2016 Vehicle Pricing index (VPI) that economic pressures are pushing up car prices and squeezing sales in SA.
Tough economic conditions have contributed to higher vehicle prices and lower sales volumes, as consumers increasingly look to more affordable cars or hold on to their vehicles for longer periods.
This is according to Derick de Vries, CEO: Auto Information Solutions at TransUnion, who says SA's low gross domestic product growth rate, increases in interest rates, higher inflation, a weakening rand and lower consumer confidence have all played a role in price increases and lower sales levels.
The VPI for new and used vehicle sales rose to 6.6% and 2.2% in the first quarter of this year from 4.6% and 1.6% in the fourth quarter of 2015 respectively. The index measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles which incorporates 15 top volume manufacturers.
"The index indicates that consumers are enduring substantial increases on both new and used vehicles, with higher consumer price index (CPI) on new cars.
The VPI for new and used vehicle sales rose to 6.6% and 2.2% in the first quarter of this year from 4.6% and 1.6% in the fourth quarter of 2015 respectively. The index measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles which incorporates 15 top volume manufacturers.
"The index indicates that consumers are enduring substantial increases on both new and used vehicles, with higher consumer price index (CPI) on new cars.
These higher new car prices will push consumers towards used vehicles, to buy down within the new space and will also force some consumers out of the market as they will tend to hold on to their vehicles for longer than they normally would," De Vries says.
He says this is evident in the percentage of both new and used cars being financed below R200,000, which has increased from 37% to 51% between quarter four in 2015 and this year's first quarter respectively.
"This indicates a shifting emphasis on the value proposition that consumers place on their vehicles, as they look for the maximum amount of value from a car."
New prices have not shifted as much as in last year's first quarter although the depreciation of the rand and other economic factors has caused the price of new cars to increase over the CPI. Manufacturers have, however, reacted and dropped their margins with marketing incentives to keep sales stimulated.
He says this is evident in the percentage of both new and used cars being financed below R200,000, which has increased from 37% to 51% between quarter four in 2015 and this year's first quarter respectively.
"This indicates a shifting emphasis on the value proposition that consumers place on their vehicles, as they look for the maximum amount of value from a car."
New prices have not shifted as much as in last year's first quarter although the depreciation of the rand and other economic factors has caused the price of new cars to increase over the CPI. Manufacturers have, however, reacted and dropped their margins with marketing incentives to keep sales stimulated.
