The outlook for the new-vehicle market has deteriorated, with new-vehicle sales declining by 2.5% for the first seven months of 2015, compared with the same period last year, says Absa Vehicle and Asset Finance managing executive Wessel Steffens.
“Economic growth, inflation, interest rates, household and business financial conditions, and levels of confidence will remain key factors impacting on vehicle sales for in the rest of the year.”
A much more upbeat Absa in January expected new-vehicle sales “to improve from the 2014 level of almost 645 000 units sold, with sales growth forecast to remain in single digits”.
Steffens says entry-level passenger cars, new model releases and manufacturer incentives will be the main contributors to new-vehicle sales volumes for the rest of the year.
He expects a further hike in interest rates of 25 basis points in November, as a result of inflationary pressures.
Rates are forecast to increase by a further cumulative 75 basis points in 2016.
The prime lending rate is forecast to reach 9.75% and 10.5% at the end of 2015 and 2016 respectively.
“The vehicle sector is an interest-rate sensitive sector, with further interest rate hikes to negatively affect the affordability of and demand for vehicle finance,” says Steffens.
Consumers are increasingly experiencing financial pressure on the back of rising inflation and interest rates, while remaining highly indebted, he adds. The percentage of credit-active consumers with impaired credit records remains on a gradually rising curve.
“Consumers are still finding it difficult to obtain credit for higher-priced vehicles.”