South Africans are snapping up new cars

According to a Wesbank survey on Vehicle Sales Confidence Indicator for the 2nd quarter of the year, overall confidence levels amongst dealers showed a marginal improvement from 5.8 out of 10 in April to 5.9 in July. The indicator reached its highest level since the first survey, in September 2007.

The survey, conducted after the World Cup, revealed an unexpected trend – an increase towards buying new, rather than used, vehicles.

On a year-to-date basis, applications received by the car financier have increased by 27.7 percent, with finance demand on used vehicles growing by only 16%. First-time approval rates have also increased by 12% over the same period last year.

Good news for dealers
Wesbank also reported that the profitability of dealers has improved. Their expectations for future market activity have remained stable and they anticipate some market growth, albeit at a lower rate.

So who are these buyers who are snapping up new vehicles?

‘Wesbank’s prediction has long been that there was a pent-up demand, due to consumers delaying the replacement of vehicles, which has been evidenced in the consistent lengthening of the replacement cycle from 28 months in 2008 to 44 months in July 2010,” said Chris de Kock, Wesbank sales and marketing executive head.

‘We are seeing a shift back towards new vehicles as the economic recovery gathers momentum. There is good value to be had in the new car market now, with vehicle CPI slowing to less than 2% and total mobility costs (made up of insurance, fuel, maintenance and vehicle instalment) being down 12.5% from last year.”

Wesbank said a large number of clients who had previously paid off their vehicles without selling them were now re-entering the new vehicle market.

‘Statistics from the Wesbank book that support this view include the fact that a growing number of Wesbank’s repeat customers (61%) had a time lag of more than 60 days between the settlement of their previous account and the re-opening of their new account,” said de Kock.

Vehicle repossessions down

‘We have seen a steady decline in the number of repossed vehicles since mid-2008. The current six months moving average is 1 133 vehicles, which is more than half of what they peaked at during the down cycle,” said de Kock.

Although the number of consumers with impaired credit records reached 8.37 million this quarter, Wesbank’s books showed an improvement over the past 12 months, largely as a result of a change in credit appetite, which started from mind-2007.

De Kock admits that consumers are still very highly leveraged. ‘There has been no material change occurring in the household debt to disposable income ratio at 78.4 percent,” he said.

A positive outlook

Nevertheless, Wesbank has revised its total 2010 vehicle sales forecast upwards to 469 914 units, compared with the 441 000 units it had previously expected to be sold this year.

This despite the fact that the new carbon tax and an increase in car allowance tax will lead to cost increases. The open road tolling system, due to be implemented in Gauteng, will also increase the cost of motoring. But consumers, it seems, are undeterred., which will be cheering news to an industry that was hard-hit during the recession.

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