TRANSPORT: Move To More Affordable Vehicles
Recent Western Cape Business News
While latest NAAMSA new vehicle sales figures show positive growth for the month of March, it appears that consumers are opting for cheaper models for affordability reasons.
Latest NAAMSA figures reveal that sales of new passenger vehicles in South Africa recorded a 25.7% increase in March 2011 to 35 167 units, from 24 172 in March 2010.
Chris De Kock, Executive Head of Sales and Marketing at WesBank, South Africa’s leading asset-based financial solutions provider, says statistics for the first quarter of 2011 show a 25% increase in the rand value of cars financed, while the actual number of cars financed rose 47%. “This shows a clear buy down trend in the market.”
According to the latest WesBank book figures, the company has also noted a 6% decrease in actual deal size over the past six months.
De Kock says this buy down trend, which is particularly prevalent in the middle market, is supported by the number of more affordable entry level models that have recently been launched. “Affordability remains the key driver in the ability of consumers to obtain finance, particularly in the lower and middle market.”
De Kock says the trend towards more affordable cars also comes as consumers feel the effects of rising mobility costs. Mobility costs include all expenditure associated with the running of a vehicle, such as monthly vehicle repayments, maintenance and parts, insurance premiums and petrol costs. “The total monthly cost of keeping an entry level vehicle on the road is around R4 465.00, when compared to R7 376.00 for a mid-level vehicle.
“During the first few months of 2011, we have already seen a rise in the petrol price, from R8.73 per litre of 95 unleaded in January to the R9.96 per litre that was recently announced. This is expected to increase further during the year in the wake of the turmoil in the Middle East.”
He says consumers’ current purchasing behaviour may also be cautious of the potential for interest rate hikes later in the year. “While we are currently enjoying the lowest interest rates for more than 30 years, many economists are predicting at least a half a percent rate hike by the end of 2011, with more to follow in 2012. With a large percentage of South Africans financing at least a portion of their car purchases, rate hikes could have a major impact on affordability down the line.”
De Kock says that while WesBank remains positive for 2011, the company expects the buying down trend will continue during the year.
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