Prices of used vehicles has increased in real terms for the first time since 2010. Picture: DENIS DROPPA
Prices of used vehicles has increased in real terms for the first time since 2010. Picture: DENIS DROPPA

New-vehicle price hikes in SA continued to soar above inflation in the first quarter of 2021, and bad news for prospective car buyers is that the situation’s likely to continue in the coming months.

According to the latest TransUnion SA Vehicle Pricing Index (VPI), vehicle prices rose for a fourth successive quarter, with the VPI for new vehicles moving to 8.8% in Q1 2021 from 4% in Q1 2020.

It is difficult to gauge how this has affected new-vehicle sales, which have been on a rollercoaster ride this year. Following a slow start to the year, sales in March increased 18.4% over February, signaling a potential turnaround for a motor industry hit by a 30% new-vehicle sales decline in 2020. Sales in April declined 17.6% but this was affected by public holidays that provided fewer selling days during the month.

According to the latest TransUnion SA vehicle pricing index (VPI), prices of used vehicles also increased in real terms for the first time since 2010. From January-March, the used vehicle VPI rose to 3.7% from 1.4% a year ago.

This suggests ongoing hardship for consumers and a motor industry struggling to recover from the financial effects of the Covid-19 pandemic, says TransUnion’s Kriben Reddy. He said new-vehicle finance deals were down 5% and used vehicles up by 7.4% in the first quarter of 2021 compared to the same period in 2020.

The VPI measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles that incorporates 15 top-volume manufacturers. The index is created using vehicle sales data from across the industry.

Reddy said lower interest rates are not enough to lure consumers into new-vehicle purchases, with demand for quality used vehicles remaining high. As a result, the supply of quality used vehicles is under pressure, which is expected to continue to push prices of used vehicles up for the foreseeable future.

He said new-vehicle sales could pick up once the “right to repair” laws are adopted later in the year, which will give consumers the choice of opting out of service/maintenance plans built into new-car prices.

New-car prices saw major hikes last year after the rand weakened from R14 to R18.30 to the dollar in early 2020. The rand’s recovery to its previous levels is potentially good news for consumers as it should slow down the rate of future price increases.

droppad@arena.africa

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