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SA’s car market has seen a massive shift in pricing trends in the third quarter of 2021, highlighted by the new vehicle price index which effectively measures the inflation rate for new vehicles.


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The new vehicle price index has shown the inflation rate halving from the same period in 2020, while the used vehicle index more than doubled in the face of changing consumer demand and supply issues.

The latest TransUnion SA Vehicle Pricing Index (VPI) for new vehicles moved from 7.6% in 2020 Q3 to 3.8% in Q3 2021, with the used vehicle index soaring from 2.3% last year to 5.9%. The VPI measures the relationship between the increase in vehicle pricing for new and used vehicles from a basket of passenger vehicles which incorporates 15 top volume manufacturers.

The index is created using vehicle sales data from across the industry.

Overall, the industry continues its slow recovery from the effects of the Covid-19 pandemic and the civil unrest experienced earlier in 2021. Total financial agreement volumes in the passenger market increased 5% year-on-year, with new passenger finance deals up 8% and used passenger vehicle deals up by 11%.

The dramatic shifts in pricing trends spell good news for beleaguered consumers, said Kriben Reddy, vice president of auto information solutions for TransUnion Africa. New vehicles are not only relatively more affordable, but consumers will also benefit from a range of incentives currently being offered by manufacturers to try and stimulate the market.

Those looking to trade in their old vehicles will find dealers willing to pay top dollar for quality cars, with a growing shortage of used vehicle stock in the country.

And even though consumers will be paying higher prices for used vehicles than a year ago, they will likely be getting a better quality vehicle for their money, as many consumers continue to trade down and/or reduce the number of vehicles in their households.

“There’s no doubt that the real story for the quarter is the huge shift in pricing patterns in the past year, which is being driven by a combination of changing consumer demand and supply issues in the new car market, where the global computer chip shortage continues to affect motor manufacturers. As a country, we import around 70% of our cars 1 , so we’re definitely feeling the effects of the shortage – and there’s no clear end in sight,” said Reddy.

Consumer buying patterns are also shifting. The Index showed that more than 70% of total new and used financed vehicles in Q3 were hatchbacks and SUVs, with new SUVs making up 32% of all new vehicles financed – which is indicative of consumers looking for practicality, said Reddy. Almost half of the vehicles financed are being bought by consumers between the ages of 26 and 40.


Pie charts showing the percentage sales per vehicle type for both new and used passenger vehicles



The used-to-new ratio increased year-on-year from 2.35 in 2020 to 2.4 in 2021 – in other words, 2.4 used vehicles are sold for every new vehicle. In the used vehicle market, 35% of vehicles are less than two years old, and this continues to decrease as the supply of quality used vehicles remains under strain.

Demo models financed made up 6% in of used financed deals in the quarter, which indicates consumers are opting for older vehicles as quality supply diminishes and pressure on disposable income increases.

The percentage of cars (both new and used) being financed below R200,000, R200,000-R300,000 and over R300,000 saw lower volumes in the lowest bracket, and more activity in the over R300,000 bracket.

This is due to ongoing price increases which have pushed many new vehicles over the R300,000 price point. There is also a growing trend of consumers downgrading from a two-car household and opting for one slightly more expensive vehicle, for example, trading two sedans for one SUV.

This is expected to continue in the upcoming months as vehicle prices increase in real terms.


Graphs detailing the vehicle asset finance bands



“The macroeconomic outlook has improved dramatically, with annualised positive GDP growth of 19.3% in Q2 2021, which is up from -3.2% in Q1 2021. Still, consumer confidence remains low and household debt-to-income ratios remain high, which puts significant pressure on consumers’ disposable income,” said Reddy.

“We’re in an interesting and rapidly changing market, where new and quality used vehicles are in short supply at a time when consumers are looking for the best value for money. The pressure on the quality used car market will continue until prices become too expensive in relation to new vehicles, and the industry will continue to operate in a challenging environment for the foreseeable future.”



Article Credit to BusinessTech Motoring.


What is your view of the new vehicle price index showing significant shifts in pricing trends? Do you think locally manufactured South African vehicles are overpriced? Let us know in the comments below. Also, if you found our content informative, do like it and share it with your friends.



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