An analysis of South Africa’s best-selling vehicles in July reveals a significant overlap between the average new loan amount and the most popular cars on the market.
This suggests that even as consumers face rising costs, there remains a strong demand for certain vehicles, although the financial burden on buyers continues to grow.
The latest Industry Insights Report from TransUnion shows that the average new vehicle loan amount in South Africa reached R395,292 in the second quarter of 2024, up from R387,000 in Q1 of 2023.
This rise in loan amounts is a direct response to the escalating costs of new vehicles, pushing consumers to borrow more to afford their desired models.
Recent figures from WesBank also reveal a concerning trend in rising vehicle costs, making it increasingly difficult for consumers to afford new vehicles and causing them to either extend their financial commitments, hold on to their older cars or look into the pre-owned car market.
WesBank's data further highlights the financial strain on consumers. In June of this year, the average loan amount for a new vehicle increased by 3.5%, while the average deal duration rose by 3.8% to over 51 months.
Additionally, the average contract period now exceeds 73 months, indicating that consumers are stretching their repayment terms to manage the higher costs.
This trend suggests that many South Africans are opting to keep their current vehicles for longer periods or are extending their loan terms to reduce monthly instalments, both of which are indicators of financial strain.
“These are all signs of affordability challenges that either indicate that consumers are holding onto their existing vehicles for longer or that they are forced to lower instalments by extending the loan period,” says Lebo Gaoaketse, Head of Marketing and Communication at WesBank.
Consider June's average loan value at WesBank of R410,000 for new vehicles. With the current prime lending rate at 11.75%, this translates to an estimated monthly instalment of R8,054.83 over 72 months.
Comparatively, a customer who financed the same vehicle in 2020 at a prime rate of 7% would have paid R1,015.81 less per month. This difference amounts to an additional R75,730.32 paid by the consumer today, over the same loan period.
IOL Motoring