Used car market also feeling the crunch

Johannesburg - The prices of used cars are continuing to decline, consultancy TransUnion Auto Information Solutions said on Monday.

New car price inflation for 2008 reached a level of 7.82 percent, up from 3.53 percent in 2007, the consultancy's Vehicle Pricing Index (VPI) found.

However, the used car market experienced negative inflation of 0.75 percent against positive 1.07 percent in 2007.

"This means that used car prices dropped significantly in 2008 when compared to 2007.

"This is as a result of significant pricing pressure following dramatic fall off in market demand through 2008, exacerbated by a supply overhang as a result of increased bank repossessions in recent months," TransUnion said in a statement.

The latest quarterly (end December 2008) VPI showed that new car price inflation had increased to a high of 10.29 percent when compared to January 2008, off the back of renewed rand weakness and rising domestic production costs. This included dramatic increases in commodity prices such as steel and Platinum Group Metals.


"This high inflation on top of already reduced consumer purchasing power and current negative sentiment was undoubtedly a factor in the 36 percent year-on-year decrease in the new car sales in January 2009," TransUnion said.

Used car price inflation for the three months to January 2009 remained negative at -0.72 percent.

"Whilst we expect the price levels of used vehicles to increase through the course of 2009, we expect this to occur later in the year once demand picks up and the supply overhang is unwound."

Looking ahead, TransUnion said that 2009 would be another challenging year for the South African motor industry.

"We anticipate ongoing new car price inflation as manufacturers try to claw back some of their exchange rate losses from 2008.

"We anticipate positive used car inflation this year," it added.

TransUnion saw new car sales gradually improving towards the end of the year. - Sapa