Vehicle and asset finance group WesBank says it expects domestic new-vehicle sales to decline by 4.4% in 2014.
The group originally forecast a 0.6% decline over 2013.
WesBank motor division GM Simphiwe Nghona says he expects new-passenger-car sales to drop by 6.6% in 2014, compared with last year, while light commercial vehicle (LCV) sales are expected to remain flat.
The original forecast was for car sales to drop 2%, and for LCV sales to grow by 2%.
Truck and bus sales will probably gain 2% in 2013, down from the original expectation of a 4% gain, says Nghona.
He is reluctant to gaze into the crystal ball to see what 2015 holds, as much of what happens will be dependent on economic conditions in the last quarter of the year. For example, the continuously weakening rand may push up new-vehicle prices further, impacting new-vehicle sales next year.
Nghona says short- and medium-term new-vehicle sales will be driven by a supply push, such as incentives offered by vehicle manufacturers and dealers.
He also believes that the interest rate curve “will remain shallow”.
Credit Applications and Used Cars
Despite slowly rising interest rates, consumer demand for vehicle finance remains robust, with September seeing a record number of applications, at a 21% increase, year-on-year.
An increasing number of buyers are also seeking value in the used-car market.
Applications for used-vehicle finance grew 29%, year-on-year, in September, with the used-to-new-vehicle sales ratio currently sitting at 1.42 : 1.
This represents year-on-year sales growth of 16% in the used market.
This year’s used-car market is estimated to number between 1.3-million and 1.4-million units by December 31.
Consumers are also spending more in 2014, with the average transaction value for new and used vehicles continuing to rise in line with inflation, says Nghona.
The average new-vehicle transaction price has increased to R256 695 in September, while the average used-car value has broken the R170 000 mark for the first time, at R171 893.
In January 2007, the average new-vehicle transaction price was below R150 000, with average used-car value below R100 000.
The use of extended finance contract periods has held steady, with the current average at just over 69 months.
Buyers are also holding on to their vehicles for longer, although not long enough, says Nghona.
On average, buyers are replacing their vehicles after 35 months – 13 months before the vehicle’s value has reached break-even point with the outstanding loan amount.
This shortfall is normally funded by dealers through various trade-in assistance programmes.
“With little leeway in household budgets, consumers will start to feel the pressure when the knock-on effects of inflation and an ailing rand start taking their toll,” adds Nghona.
“Vehicle replacement cycles could be delayed, or buyers will move to the used market to find better value.”