Johannesburg – Rising prices for new vehicles has contributed to the demand for used vehicles among consumers.
This is according to the TransUnion Vehicle Price Index (VPI). The VPI uses sales data collected across the industry.
It shows that the increase in new vehicle price exceeded inflation by an average of 3%, for the past three quarters.
Data for the fourth quarter of 2016 showed that the prices for new vehicles increased to 9.4%. This was up from 4.6% for sales in the same period in 2015. The prices for used vehicles increased from 1.6% to 3.3%.
“The 2% decline in growth of GDP year-on-year compounds the pressure put on vehicle manufacturers to increase their prices,” said Derick de Vries, CEO, Auto Information Solutions at TransUnion.
“The wake of a volatile economic climate has domestic vehicle consumers continuing to prefer to hold on to existing vehicles or purchase used vehicles rather than buy a new car.”
Further, the volume of deals financed for in the fourth quarter decreased by 25% on new vehicles and increased by 8% on used vehicles.
TransUnion data shows that manufacturers are responding to the decline in new vehicle sales with decreased margins. They are also increasing marketing incentives to boost sales.
De Vries said Volkswagen is continuing to outperform other manufacturers, leading in both new and used vehicle sales. This is followed by Toyota, with more than 20% of the new vehicle market, and Ford.
“We see the new car market stabilizing in 2017 with no further contraction,” said de Vries. He added that manufacturers should note that consumers’ shift to used vehicles is largely driven by the higher than inflation rise in new vehicle prices.
Fin24 previously reported that although 2017 may be a difficult year for car sales, the National Association of Automobile Manufacturers of SA (Naamsa) expects modest improvements in the second half of the year. Year-on-year growth may settle in the 2.5% to 3.5% range.
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