South Africa’s biggest vehicle financier, WesBank, said in a statement on Friday that the local motor industry will see the impact of higher interest rates in the new year.
Although the industry’s sales are set to peak again this year, Thursday’s 50 basis-point hike — which takes the prime-lending rate to 12,5% — will be noticeable in the coming months, WesBank said.
CEO Ronnie Watson said: “The South African motor industry is a leading economic indicator as car-sale trends lead the economy by nine months. As a result, the full impact of the interest-rate increases on the economy is only likely to be noticeable in the coming months.”
He noted that an increasing number of its customers were selecting the fixed-rate option over the variable rate — with 57% of the customer base having fixed their rates by the end of November.
“We have seen a marginal decline in vehicle sales since the first interest-rate announcement in June this year, particularly in the consumer market.
“It is interesting to note, however, that South Africa’s corporate market has not been affected by the same decline. Companies are continuing to purchase vehicles ranging from rental cars and fleets to trucks to take full advantage of the growth in the economy leading to 2010,” added Watson.
WesBank also anticipated an increase in the used-car market over the new-car market as interest rates start to impact purchasing patterns.
“In October 2003 when the prime lending rate was last at l2%, the new-to-used ratio was 1:1,5. Currently the new to used ratio is 1:1. However, we are seeing a change in this trend in favour of the used-car market,” concluded Watson. — I-Net Bridge