The TransUnion SA Vehicle Pricing Index (VPI) for the second quarter of 2019 shows South African car-buyers are making “a clear shift back to vehicles under R200 000”.

The VPI measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles, which incorporates fifteen top volume manufacturers.

In its latest quarterly report, TransUnion SA said the local vehicle market “continues to struggle, with the bulk of the buying activity currently taking place in the used car sector as financially stretched consumers increasingly opt for older cars at lower price points”.

The firm’s figures show the number of new and used vehicles financed have fallen 7,0 percent and 2,0 percent respectively quarter-on-quarter. This despite the VPI for new and used vehicle pricing remaining below inflation, with used vehicle pricing increases at their lowest since Q2 2014.

The new vehicle VPI moved to 3,1 percent in Q2 2019 from 2,6 percent in Q1, while the used vehicle index fell sharply from 2,5 percent to 1 percent.

The latest VPI report showed the used-to-new vehicle ratio had increased from 2,05 in 2018 Q2 to 2,16 in 2019 Q2 (meaning 2,16 used vehicles were financed for every new vehicle financed). The make-up of used vehicle sales is also shifting, says TransUnion, with 34 percent of used vehicles financed under two years old, and 6,0 percent of those being ex-demo models (indicating consumers are opting for older vehicles as pressure on disposable income increases).

“People continue to spend less on cars, with a clear shift back to vehicles under R200 000 as consumers continue to feel strain on their disposable income. The percentage of cars (both new and used) being financed below R200 000 is at levels last seen in Q2 2013, which effectively means that consumers’ purchasing power has not changed since that time and has actually decreased in real terms (that is, taking inflation into account),” the report said.

Indeed, according to TransUnion’s figures, 39 percent of vehicle deals financed in the quarter were under R200 000, 28 percent between R200 000 and R300 000 and 33 percent more than R300 000.

“Average loan size in this quarter is also similar to that of Q2 2013, further emphasising pressure on consumers’ disposable income and the emergence of increasing demand for entry level vehicles or older used vehicles,” the report added.

Original article from Car