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The demand for old cars has raised prices. The average list price of used cars for sale increased by 10%, rising from R386,682 in 2021 to R427,290 in 2022.
Comparing AutoTrader data between Q1 and Q3 2022 with the same period in 2021 shows that the market continues to thrive.
Due to a significant year-over-year increase, the number of searches and ad views increased by 5.64% during the above period. Search is an indicator of popularity, ad views indicate interest in a particular car, while inquiries indicate which car consumers are most likely to purchase.
Moreover, the supply does not keep up with the demand. While the seven cars that dealers receive the most inquiries for remain the same, the inventory levels of these mostly local cars have changed dramatically.
The supply of the country’s best-selling used passenger car, the locally produced VW Polo Vivo, has halved, while the second biggest drop in used car supply is the BMW 3 Series (33%), followed by the local Mercedes-Benz C.-Class (17%). and VW Polo (16%), as well as the imported VW Golf (11%).
In contrast, the supply of second-hand bakery products produced in SA has increased. The Toyota Hilux (the vehicle receiving the most requests) increased supply by 18% and the Ford Ranger by 3%.
Still, some worrying local and international signs point to the used car bubble bursting.
Locally, rising interest rates and inflation, as well as sharp increases in fuel prices, are likely to weigh on demand. As the cost of living continues to rise, consumers are feeling the pinch.
Moreover, while South Africa is lagging behind overseas trends, there are troubling indicators emerging abroad, not the least of which are falling used car prices and concerns about the US auto loan debt market.
So, can we expect a drop in demand for used cars in 2023? CEO George Meany appears to believe that addressing new supply chain issues, as well as new car chip shortages, could boost demand for new cars and put pressure on used car prices as demand falls.
“The bubble of used vehicle price growth is buckling and, given the right supply and demand economic conditions, could burst within the next 12 months. As housing costs rise, so do interest rates. Demand for cars may fall. I always say that if the US or the EU sneezes, we get pneumonia,” Mini wittily remarks.
Source: Nikki Channels
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