The prolonged economic challenges across various sectors in South Africa have had a profound impact on the automotive industry, with a significant decline in new car sales over the past year. Monthly data released by naamsa | the Automotive Business Council has consistently highlighted the trend, revealing how consumers are increasingly seeking more affordable alternatives to new vehicles. This shift has brought the pre-owned vehicle market into sharp focus, offering buyers a practical solution during tough financial times.
WesBank’s Business Intelligence data for the first half of 2024 provides compelling evidence of this change. Applications for pre-owned vehicle finance have surged, outpacing new car applications by more than a two-to-one ratio. Specifically, WesBank received 337,061 applications for new cars, while a staggering 688,316 applications were submitted for pre-owned cars.
Lebo Gaoaketse, Head of Marketing and Communication at WesBank, attributes the spike in demand for used cars to one key factor: affordability. “The inevitable depreciation of a vehicle means pre-owned cars are generally cheaper than brand new alternatives,” Gaoaketse explains. This is especially true in South Africa, where many consumers are struggling to balance their budgets amid rising living costs.
Gaoaketse notes that while pre-owned cars are typically more affordable, there are rare exceptions. Some vehicles, particularly those considered classics or collector’s items, can appreciate in value due to their scarcity. However, for the average buyer, used cars offer a more financially viable option.
That said, the shift to pre-owned vehicles does come with its own set of challenges. One of the main concerns is the potential expiration of bundled maintenance or service plans, as well as manufacturer warranties. Unlike new cars, which often come with comprehensive warranties, pre-owned vehicles may require the buyer to take on maintenance costs themselves. Gaoaketse warns that “the condition of the car depends largely on how well it was maintained by its previous owner.” This emphasizes the importance of buying from a reputable dealer to ensure the vehicle has undergone thorough inspections.
Another drawback in the used car market is the lack of customization options. Buyers cannot configure a pre-owned vehicle to their exact specifications, a limitation that often requires additional time and effort spent searching for the desired features in the second-hand market.
In contrast, new car buyers enjoy the benefits of customization, selecting features that suit their preferences. The peace of mind that comes with owning a new car is also a significant advantage, thanks to the extended warranties and service plans that often accompany new vehicle purchases. These perks provide worry-free motoring for several years, making new cars an attractive option for those who can afford them.
However, the economic headwinds are beginning to shift. Gaoaketse suggests that factors such as a cut in the repo rate and the continued introduction of value-oriented models may help revive the new car market. “These new car perks, along with economic adjustments, are expected to drive the resurgence of the new car market, which remains a key part of South Africa’s economy,” he adds.
As South Africa navigates its economic challenges, the pre-owned vehicle market has proven to be a lifeline for many consumers. Yet, with the right incentives and financial environment, the allure of a brand-new car may once again regain its place in the hearts of South African motorists.
