Durban - With disposable income shrinking on a monthly basis due to the constant fuel and cost of living increases, research into the South African used car sales market has shown that the industry has experienced a boom in recent years.
With the Covid-19 pandemic and volatile geopolitical tension affecting new car supplies, SA’s used car market has grown over the years, but just how big is it and where is it likely to go?
According to Carl Moodley, chief underwriting and claims officer at Genric Insurance Company Limited, the war between Russia and Ukraine has affected the supply of new cars.
Coupled with the floods that KwaZulu-Natal suffered in April and May this year, which affected one of the country's leading car manufacturers, Toyota, the used car market has seen a boom, Moodley said.
He said consumers are looking to take out mechanical warranty insurance, service and maintenance plans and credit shortfall insurance to protect themselves against out-of-warranty cars and service costs.
“When buying a used vehicle, even if relatively new, there are important risk and insurance considerations to look at, not only in terms of insuring your vehicle for the correct replacement value in the event of theft or accident, but also protecting your pocket against the unexpected costs of a major mechanical component breakdown, as well as managing your routine servicing costs,” Moodley said.
During last year, buyers in the second hand car market looked for vehicles between R200 000 to R300 000, said consumer experience manager for Cars.co.za, Hannes Oosthuizen.
“The average price (for submitted enquiries) worked out to R236 900, which is slightly higher than the average in 2020. The R200 000 to R300 000 segment alone accounts for 20.6% of enquiries (also called “leads”) submitted on Cars.co.za during 2021, with the segment for cars priced between R150 000 and R200 000 slotting into second place, with a share of 16.34%.
“In third place is the R300 000 to R399 000 segment, with a 11.82% share of enquiries. Deeper analysis shows that higher price segments have grown fairly significantly compared with 2020,” Oosthuizen said.
He said there was a growth in terms of enquiries made for vehicles with higher mileage, with the bulk of enquiries made were for vehicles first registered between 2014 and 2018.
According to Oosthuizen, Volkswagen, Toyota and Ford are South Africa's top three used car brands, based on enquiries they received.
BMW and Mercedes Benz come in at fourth and fifth place.
TransUnion Africa’s 2021 fourth quarter SA Vehicle Pricing Index (VPI) showed used vehicles jumped from 2.9% in 2020 to 7% in 2021. The VPI measures the relationship between the increase in vehicle pricing for new and used vehicles.
TransUnion figures showed that 2.31 used vehicles were sold for every one new vehicle during the aforementioned period.
“The high demand for quality used vehicles, combined with limited supply, is directly driving the used vehicle pricing trends we’re seeing right now. Sourcing inventory has been a major issue, with consumers and fleets alike holding onto their vehicles for longer.
“With a long waiting list for new vehicles, consumers are opting for the used vehicle market – and prices are not going to ease soon, as interest rates remain relatively low, despite recent hikes, said Kriben Reddy, vice president of auto information solutions for TransUnion Africa.
Local automotive media site Top Auto quoted We Buy Cars, saying that the VW Polo was the most sought after used car in South Africa.
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