Pressure on used car market continues - TransUnion
Johannesburg, 02 July 2012 - Despite a slowdown in new car price inflation in the second quarter of the year, used car price inflation continued to lag, indicating on-going pressure on the entire pre-owned market.
The Q2 TransUnion Auto Vehicle Pricing Index (VPI) released today reveals a statistically insignificant 0.1% upward move in used vehicle inflation to 2.4%. New car inflation slowed from 3.6% in the first quarter of the year, to 2.9% in the second.
“The new car market continues to be relatively strong as consumers are enticed by excellent new car deals,” said Mike von Höne, CEO of vehicle risk intelligence company, TransUnion Auto Information Solutions.
“However, this is placing even more pressure on used dealers, particularly the independents, as more consumers are choosing news cars over used vehicles.”
Published quarterly, the TransUnion VPI measures the year-on-year price inflation of a market weighted basket of new and used vehicles, drawing on data received by TransUnion on vehicle financing registrations from all the major banks and vehicle finance houses as well as monthly sales returns from thousands of dealers throughout the country.
Used vehicle financial registrations for May 2012 reveal year-on-year growth of around 7%. Despite this, and a slight shift in the ratio of new to used cars financed – from 1.76 used cars for every new car financed in March, to 1.88 used to one new car financed in May – used dealer profit margins continue to be squeezed.
Dealer returns received by TransUnion clearly indicate that dealers are being forced to buy in stock at less than the trade value indicated in the Auto Dealers’ Guide. This means consumers are getting progressively less for their trade-ins.
“They have to do this in order to be able to maintain sustainable margins. We do not anticipate this trend reversing in the foreseeable future,” von Höne added.
Most pressure is being experienced in the high-volume, low-margin, budget end of the used car market where competition with new car sales is fiercest. There is also considerable pressure in the premium end, where dealers traditionally could rely on solid margins, but where demand has declined as consumers continue to ‘buy down’.
As a global leader in information and risk management, TransUnion creates advantages for millions of people around the world by gathering, analyzing and delivering information. For businesses, TransUnion helps improve efficiency, manage risk, reduce costs and increase revenue by delivering high quality data, and integrating advanced analytics and enhanced decision-making capabilities. For consumers, TransUnion provides the tools, resources and education to help manage their credit health and achieve their financial goals. Through these and other efforts, TransUnion is working to build stronger economies worldwide. TransUnion reaches businesses and consumers in 32 countries around the world. Based in Johannesburg, with global headquarters located in Chicago in the US, TransUnion is one of Africa's oldest credit bureaus. Visit www.transunion.co.za orwww.mytransunion.co.za for more information.