High cost of car ownership keeps 1.9 million car finance holders stagnant

Read the Daily Maverick article here: Financing costs and prices slam brakes on SA’s new car sector

The demand for new vehicles falls

There are approximately 12 million registered motor vehicles in South Africa.  But when excluding light and heavy delivery trucks, taxis and motor-cycles, fewer than one in five adults have a personal vehicle.  There are roughly 8 million motor cars and station wagons, as measured by eNaTIS, but not all are owned by private individuals.

According to NAAMSA, new passenger vehicle sales have been declining, with 2023 showing 347 695 units sold, which is a decrease of 4.4% compared to 2022 which had 363 692 units sold.  A difference of nearly 16,000 cars. The trend has continued into 2024, with year-to-date new sales by April down by 5.1% year-on-year.

Eighty20, South Africa’s leading consumer insights and data science firm, provides interesting insights into the decline in passenger vehicle sales. The analysis includes various sources and highlights how sales have been impacted by:

  • The state of the economy and shrinking disposable income
  • Inflation (and supply chain issues) adding to the cost of new cars
  • The cost of borrowing for vehicle asset finance (VAF)
  • Alternative transport options

Both the MAPS, a nationally representative survey of 20,000 people conducted by the MRF, and the General Household Survey, a StatsSA survey of 21,000 households, find that roughly 30% of households own a working vehicle. The average household income for car owners is R33,000 per month (and R20,000 personal income). For those who purchased a model built in the past two years however, household incomes average around R47,000. With only 16% of households nationally earning R30,000 or more, the demand for new vehicles is shrinking.

For high earners who qualify for VAF, the cost of borrowing has surged over the past three years.  Since mid-2021, there have been 10 consecutive interest rate hikes, raising the Prime Lending Rate from 7% to 11.75% in 18 months.

To illustrate the impact on a new car buyer, consider one of South Africa’s most popular vehicles, the Toyota Hilux, which sold over 3,300 units last year.  A person who bought the new 2.8 GD-6 RB Legend X-Cab model for R574,900 in 2021 on a 72-month lease with no deposit and no balloon payment would have had monthly instalments of around R10 500. By early 2023, those monthly payments would have increased by nearly R1,200.

For many, vehicle inflation has also made new cars unaffordable.  The Hilux in the previous example currently retails for R701 800, which is about R125 000 (22%) more than in 2021.  This requires a monthly instalment of more than R14 000 per month.  In fact, Top Auto recently found that 73% of all new cars in South Africa cost over half a million rand, (requiring a minimum ~R10 000 per month financing).  This is one reason why the number of people with vehicle asset finance (1.9 million), has not increased since 2019.

“This trend has significantly affected the middle class, who hold around 30% of all VAF loans. Over the past two years, their loan balances have steadily decreased, with a notable decline of 100,000 individuals holding VAF loans in this segment. Due to inflation and economic conditions, South African car owners are either holding onto their vehicles for longer, or opting for cheaper used cars,” says Eighty20.

According to Lightstone data, over 42% of vehicles on South Africa’s roads are between 11 and 20 years old. In 2022, the average age of passenger vehicles was estimated at 10.5 years, an increase from the average of 9.33 years seen in 2014 and 2015.

In April 2024, there were 21,608 new passenger vehicle registrations and 75,594 used vehicle registrations. A year earlier, these numbers were 23,524 and 77,171, respectively. While vehicle registrations can vary month to month, new car registrations have decreased by 8%, whereas used car registrations have only dropped by 2%.

These factors have contributed to the rise of companies like We Buy Cars, Weelee, GetWorth, and Carzuka, outspending each other on billboard ads in Johannesburg. Additionally, this trend has boosted alternatives to car ownership such as leasing, rent-to-buy models or switching to e-hailing services such as Uber and Bolt. According to MAPS, the percentage of people claiming to use e-hailing services doubled between 2022 and May 2024.

“An interesting trend is that too many South African motorists are in fact still purchasing vehicles that are too expensive in relation to what they should spend monthly on mobility.  Hence the consumer behaviour will eventually undergo a major shift away from lengthy onerous instalment sale-based purchases to shorter term lease options.” says Deolinda Da Costa, Head of Marketing & Communications at Mazda Southern Africa.

One silver lining in all this could mean shorter commute times and less traffic.   According to TomTom’s Traffic Index, in Cape Town, it takes Capetonians an average of 13 minutes and 20 seconds to travel 10 km within the Cape Town Metro area. This lengthy commute, coupled with an average of 48 hours per year spent sitting in rush hour traffic means Cape Town beats out Johannesburg as the most congested city in South Africa.

“Rising vehicle costs coupled with fuel prices which have doubled since 2020 – makes car ownership even more of a privilege. For example, a Hilux driver who had a monthly diesel bill of R1,800 in 2020 now spends R3,700 per month to drive the same distance,” concludes Eighty20.


 

Leave a Reply

Your email address will not be published. Required fields are marked *

Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Enter your email address
Enter your email address and we will send you a download link via email.
* We hate spam and never share your details.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
* We hate spam and never share your details.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
* We hate spam and never share your details.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your details below
We will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
Contact: +27(0) 21 461 8020
By downloading this report you agree to our terms and conditions.
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Enter your email address
Enter your contact details and we will get back to you with more information.
Contact: +27(0) 21 461 8020
By downloading this report you agree to our terms and conditions.
Share the Eighty20 Happiness Diagnostic
Enter their details and we will send them a link to the diagnostic.
Contact: +27(0) 21 461 8020
By downloading this report you agree to our terms and conditions.
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Yes, keep me posted!
Enter your name and email address, we will send you a notification via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
Contact: +27(0) 21 461 8020
By downloading this report you agree to our terms and conditions.
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020
Enter your email address
Enter your email address and we will send the link to you
This is a test to see if the new api key is working
Enter your email address
Enter your email address and we will send you a download link via email.
By downloading this report you agree to our terms and conditions.
Contact: +27(0) 21 461 8020