The latest TransUnion Vehicle Pricing Index (VPI) indicates an unusual trend where used car prices are now tracking new car prices.

In addition, for the fourth consecutive quarter, used car inflation has increased on a year-on-year basis, rising by 1.36% between the fourth quarter of 2013 and the fourth quarter in 2014.

TransUnion publishes the VPI on a quarterly basis. The vehicle risk intelligence company calculates the VPI from data it receives on monthly sales returns from a large number of dealers throughout South Africa, as well as vehicle financing registrations from all of the major banks and vehicle finance houses.

From 2012 to 2013, the used car market experienced five straight quarters of year-on-year price deflation, notes TransUnion in its newest VPI report, issued this week.

“Historically, used car price trends tend to lag behind those of new cars, generally seeing an increase in pricing only a few months following new car pricing inflation. However, for the past couple of months we have seen used car pricing trends keeping pace with new – rising almost simultaneously,” explains TransUnion Auto Information Solutions CEO Keith Dye.

“We have also seen a slight decline in the number of used vehicles sold relative to new cars during this quarter.”

According to TransUnion’s records of financial registrations, the trend towards purchasing used rather than new vehicles, which emerged in the first quarter of 2014 and continued into the third quarter, has started to reverse in the fourth quarter, with the ratio of used to new vehicles reaching 1.76 to 1 during the final quarter of 2014, down from the third quarter’s 1.81 to one.

This ratio, however, has not yet reached the lows of 1.65 as in the second quarter of 2014, 1.52 in the first quarter of the same year, and 1.25 at the end of December 2013.

“This decline is not material and may be affected by the purchasing patterns of car rental organisations, which tend to re-fleet their operations during the last quarter of the year, inflating the number of new cars sold relative to used cars,” notes Dye.

The TransUnion VPI indicates that used car inflation is still surpassed by the rise in new car prices, which once again outpaced the Consumer Price Index (CPI).

At 7.18%, new vehicle price increases reduced significantly over the third quarter of 2014, when the rate rose as high as 7.82%. This represents the first downward trend after four consecutive quarters of year-on-year new vehicle price inflation.

Despite the recent softening in the market, used car dealers should not worry.
 
“Statistically, this has not been a significant or dramatic quarter in terms of the VPI. None of the trends that we are currently seeing represent dramatic changes or shifts and are not currently cause for concern,” says Dye.