As we approach 2024, the landscape of car ownership in South Africa is undergoing a significant transformation. The National Association of Automobile Manufacturers’ recent report indicates a 4.4% decline in new vehicle sales this past November, a clear sign of the economic headwinds we face. High-interest rates, inflation, and a sluggish economy are the main drivers behind this downturn. Yet, there’s a silver lining on the horizon with the anticipation of lower interest rates by March, which could provide much-needed relief to consumers.
Consumer Caution and Emerging Trends
In my recent interview on Newzroom Afrika, I had the opportunity to delve into the evolving consumer behaviour in our market. South Africans are becoming increasingly cautious with their financial commitments, especially regarding assets like cars. This caution shapes the industry, with several key trends emerging as we move into the new year.
One such trend is the subtle shift from used to new cars, fueled by innovative purchasing methods. Online car buying, leasing, and car subscriptions are gaining traction, offering alternatives to traditional car ownership. These options are particularly beneficial for those who may find it challenging to obtain finance, such as individuals who are blacklisted or lack sufficient affordability credentials.
The Rise of Car Subscriptions
As the CEO of AutoTrader South Africa, I’ve witnessed firsthand the potential of car subscriptions to revolutionise how we think about car ownership. This model provides flexibility and accessibility, allowing consumers to drive a car without the long-term financial burden of a loan. It’s a trend that’s picking up speed and will play a significant role in the future of our industry.
Smart Buying Strategies
Consumers must spend ample time on research and financial planning regardless of the purchasing method. I always advise using independent platforms for additional research, shopping with an expert, investigating a dealer’s reputation, and considering a car warranty if it’s not included in the purchase.
Financial Wisdom
A car purchase is often an emotional decision, but it’s important not to let emotions lead to financial overextension. I recommend that car repayments, including insurance and running costs, be at most 50% of your monthly income. With the additional costs of car ownership, such as fluctuating fuel prices, it’s wise to consider second-hand vehicles as a more affordable option.
Fuel Prices and Planning
Layton Beard from the Automobile Association of South Africa has highlighted the importance of factoring in fuel price fluctuations when planning a new car purchase. By calculating costs at the higher end of the scale, consumers can create a financial buffer to accommodate these changes.
The Road Ahead
Despite the challenges, the South African automotive industry is resilient. While new vehicle sales and production face pressures from logistical and power challenges, we are adapting and finding innovative ways to thrive. As we navigate the road ahead, staying informed and making strategic decisions will drive success in 2024 and beyond.
