While Naamsa expects 2016 to be a lacklustre year for new vehicles sales in South Africa, current market conditions might just hold opportunities for growth in the used vehicle market.

TransUnion’s Vehicle Pricing Index for the third quarter of 2015 showed a marginal widening of the ratio of new to used vehicles financed from 1.81 (one new vehicle to every 1.81 used vehicles financed) to 1.83 on a year-on-year basis.

During Quarter 3 of 2015, used car price inflation was down during the period from 1.53% to 1.44%.

According to the report, the continued weakening of the Rand in the third quarter of 2015 forced manufacturers to effect new price increases that are well above CPI rates, which did not bode well for new vehicle dealers. While the various marketing incentives offered by manufacturers have helped to minimise the sales decline in the new vehicle market, the reality is that consumers will continue to seek more affordable vehicles, of which there is abundance in the used market.

According to Derick de Vries, CEO of auto information solutions at TransUnion, although marketing initiatives are stimulating new car sales, consumers are still seeing better value for money in buying used vehicles. “With household debt rising, consumers still aspire to drive a new vehicle, but simply can’t afford it. Many are prepared to settle for a used vehicle that is cheaper with higher mileage or with more extras.”

WesBank’s data corroborates this growing trend in the used market. According to Rudolf Mahoney, head of brand and communications at WesBank, more and more consumers are applying for finance on used cars than people applying for new car finance. Those applying are also structuring their contracts to make repayments more affordable. Contract periods are being maxed out, with the average at 69 months, and they are seeing more demand for balloon payments too.