Cape Town – Rental companies are hanging on to used cars as tourism numbers drop and firms stretch out the lifespan of their car fleets, according to WesBank.
“The rental market is down 19% compared to May,” said executive head of WesBank’s motor division, Simphiwe Nghona.
Nghona told Fin24 on Wednesday that WesBank attributes that to the tourism industry that has dropped. “We suspect that rental companies are rather choosing to stretch the usage of the vehicles instead of replacing them at a certain stage,” he said.
While June 2015 showed an improvement in sales of passenger vehicles, which increased by 4.1% (5% overall), a year-on-year (y/y) monthly comparison shows a decline in sales of 6.6% (4.8% overall), according to data released by Naamsa.
Used cars in demand
“Consumers find themselves under massive pressure on a number of fronts,” said Nghona.
“Consumers have a desire to buy cars, as credit application forms have increased by 11.8% y/y,” he said. “If we break that down, new car applications have increased 9.3% y/y while used cars show a 13% y/y increase.”
“We are seeing a gradual shift to consumers buying used cars instead of new cars,” he said. “Consumers are finding more value with used cars with lower mileage. A new car costs 4.9% more than they year before.”
Highly indebted South Africans were being protected now more than ever, according to Nghona.
“While vehicle sales are down and credit applications are up, consumers are highly indebted,” he said.
“The introduction of the National Credit Act’s affordability assessment amendment requires lender and banks to be more careful to protect consumers to ensure they can afford loans,” he said. “This came into effect on March 13.
“The gross income of the consumer needs to be evaluated,” he said. “The consumer has to submit three payslips or banks slips.
“This protects consumers from getting loans they shouldn’t get, but this lowers the approval rate of consumers.”