THE effects of last year’s multiple interest rate hikes were apparent on Tuesday, with the National Association of Automobile Manufacturers of SA (Naamsa) reporting a 6.1% drop in new car sales last month.
Truck sales were even lower, with the double-digit decline in orders a reflection of weakness in SA’s economy, which is barely expected to grow this year.
Total vehicle sales dropped by more than 4,000 units, or 8.1%, last month to 48,149.
Passenger vehicles fell by 6.1% while light and medium commercial vehicles slumped 13.1% and 12.9% respectively.
"The interest rate increases we have experienced in the past year are starting to (filter) in now more than ever," said Nicholas Nkosi, head of vehicle and asset finance at Standard Bank.
He cited the strengthened shift towards the used car market and the increase in the average contract term from 67.8 months to 69.2 months as an indication that higher borrowing costs were taking their toll on households.
"Consumers are stretching out their repayment terms by as much as possible to allow for greater affordability," said Mr Nkosi.
Further evidence of the shift towards the used car market was provided by Wesbank’s Rudolf Mahoney. "Applications for finance on new cars only grew by 0.5% last month," he said.
In contrast, applications for used cars rose 11%. Used cars were outselling new cars by a ratio of 1.48:1 "The last time the Westbank ratio was at these levels was in 2011," Mr Mahoney said.
The South African Reserve Bank has raised interest rates three times by a cumulative 100 basis points since July last year, to stave off rising inflation and economists expect more rate hikes this year.
Naamsa envisages the new car market declining by 9% in volume terms this year, with the commercial side faring slightly better, with an expected 5% fall.
Picture: THE HERALD
THE effects of last year’s multiple interest rate hikes were apparent on Tuesday, with the National Association of Automobile Manufacturers of SA (Naamsa) reporting a 6.1% drop in new car sales last month.
Truck sales were even lower, with the double-digit decline in orders a reflection of weakness in SA’s economy, which is barely expected to grow this year.
Total vehicle sales dropped by more than 4,000 units, or 8.1%, last month to 48,149.
Passenger vehicles fell by 6.1% while light and medium commercial vehicles slumped 13.1% and 12.9% respectively.
"The interest rate increases we have experienced in the past year are starting to (filter) in now more than ever," said Nicholas Nkosi, head of vehicle and asset finance at Standard Bank.
He cited the strengthened shift towards the used car market and the increase in the average contract term from 67.8 months to 69.2 months as an indication that higher borrowing costs were taking their toll on households.
"Consumers are stretching out their repayment terms by as much as possible to allow for greater affordability," said Mr Nkosi.
Further evidence of the shift towards the used car market was provided by Wesbank’s Rudolf Mahoney. "Applications for finance on new cars only grew by 0.5% last month," he said.
In contrast, applications for used cars rose 11%. Used cars were outselling new cars by a ratio of 1.48:1 "The last time the Westbank ratio was at these levels was in 2011," Mr Mahoney said.
The South African Reserve Bank has raised interest rates three times by a cumulative 100 basis points since July last year, to stave off rising inflation and economists expect more rate hikes this year.
Naamsa envisages the new car market declining by 9% in volume terms this year, with the commercial side faring slightly better, with an expected 5% fall.
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