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South African drivers are downgrading their cars and keeping their vehicles for longer as higher prices and rising living costs keep households under pressure.
These are two key trends that have emerged in the sector, according to Niel Roets, chief executive of Debt Rescue, as South African consumers continue to struggle to keep their finances balanced.
Roets noted that with the latest fuel price hike – which took effect from Wednesday (2 August) – more motorists are likely to downgrade their vehicles to find something more affordable and fuel efficient.
Fuel prices have risen across the board for August, with both grades of petrol increasing by 37 cents per litre and diesel going up by 71/72 cents per litre.
The hikes come as households remain under pressure due to inflation, high interest rates and recent hikes to electricity and other utilities.
“Food inflation hit record highs in the first quarter of 2023, and embattled consumers are struggling to put enough food on the table. Now there will be even less to go around as they contend with higher transport costs, both private and public,” Roets said.
While some relief is on the way – inflation has eased significantly and the Reserve Bank has put a hold on interest rates for now – it will still take some time for this to filter through the economy.
In the meantime, households are adapting as best they can, where they can, which includes making changes to big-ticket items.
Rainer Gottschick, CEO of retail and rental at Motus also identified the trend of South Africans downgrading their vehicles to counter the economic environment.
“We are seeing consumers buying down in the current high inflationary and interest rate environment. Motorists are changing to less premium brands and to lower-category vehicles,” he said.
However, another key trend has emerged, with Gottschick also noting that there has been an extension of the car replacement cycle to 48 months.
These trends are having a wider impact on the South African car market, however.
Despite consumers trading down, the demand for pre-owned vehicles remains significantly lower than pre-pandemic levels, according to TransUnion Africa chief revenue officer, Stephen de Blanche.
De Blanche noted that 29,267 used vehicles were financed on average each month in 2022, while the 2023 figure is 26,161 so far.
The decline is a result of a major shortage of quality used vehicles, along with a steep rise in prices, he said.
TransUnion’s vehicle pricing index shows that used vehicles are now 9.8% more expensive than a year ago.
Reflecting the trend of South Africans holding onto their cars for longer is the fact that, historically, approximately 40% of used vehicles that were financed, were between one and two years old – now only 20% fall into this category.
Read: How much it costs to drive South Africa’s most popular cars at the current petrol price
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