The used car market is the place to be for buyers

The latest data from Transunion shows that previously owned vehicle price increases went from 2,5% in the first quarter of 2019 to only 1% in the second.

That is the lowest recorded quarterly increase in five years, and well below the current official inflation rate of 4,5%. The same data shows that the ratio of new cars sold to previously owned dealers in SA has risen from 2,05 to 2,16 – this means the volumes in the used car market are well over double that of new vehicles.

The grim macroeconomic climate – with GDP declining, unemployment increasing and consumer confidence remaining low – is obviously driving the hunt for value among SA car buyers.

Fewer purchasers are prepared to invest in a new vehicle which will lose a significant amount of resale value the minute it is driven off the showroom floor, especially when the Transunion data shows that new vehicle prices rose by 3% in the second quarter.

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But if they will not buy new, SA car buyers are doing the next best thing – 40% of used car purchases registered by Transunion are for vehicles under two years old or are demo models.

An important component of these sales for purchasers is getting the security and value of a decent maintenance or service plan as part of the deal. Gumtree Auto’s sales data indicates that used car buyers currently are seeking safe havens in reliable, well-known brands.

This is not an environment to encourage adventurous or bold vehicle choices. The tried and trusted cars, which feature every year as finalists in the Gumtree Pre-Owned Auto Awards, are there for a reason… or for several reasons: they hold resale value well, run reliably, are relatively inexpensive to service, and, very important given concerns about the immediate future of the rand, have good fuel consumption.

In the absence of any realistic evidence of a significant change in the macroeconomic outlook, we can expect these key trends on SA vehicle buying revealed in the second quarter data to only get stronger in the near future. Jeff Osborne is head of key accounts at Gumtree Auto

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