TransUnion: Used car inflation continues to slide

Johannesburg, 02 October 2013  - As new car inflation touched 4.14% in the third quarter of this year - its highest level since December 2010 - used vehicle prices experienced their fourth consecutive quarter of decline.

According to TransUnion’s third quarter Vehicle Pricing Index (VPI), used vehicle inflation dropped to -3.09% from -2.5% in the previous quarter of 2013.

Vehicle risk intelligence company TransUnion Auto Information Solutions, calculates the VPI from data it receives on monthly sales returns from thousands of dealers throughout the country, as well as vehicle financing registrations from all of the major banks and vehicle finance houses.

TransUnion Africa president Geoff Miller said the latest VPI reflected the ongoing divergence of new and used car prices that first became apparent at the end of 2012.

The slide in used car prices is yet another manifestation of the enormous pressure consumers are under,” Miller added.

“The third quarter TransUnion Consumer Credit Index showed that consumer credit health is declining, continuing a three-year downward trend; while the latest Bureau for Economic Research’s consumer confidence index, released last week (26 September) plummeted to a 10-year low.

“However, the tide appears to be turning for the used car market, offering a glimmer of relief for dealers. The market has not experienced this level of used car deflation since June 2006, and TransUnion’s month-on-month returns indicate that the market may be at the start of a slow recovery,” Miller said.

While the ratio of used to new vehicles sold swung slightly  back in favour of new cars at 1.65 (average July and Aug) from 1.70 in the second quarter, TransUnion believes this is just a temporary anomaly.

“Given the rising cost of new cars – a trend that is unlikely to fade in the face of the ongoing volatility of the Rand – TransUnion anticipates demand for used vehicles to pick up in the months ahead.

“Indeed, the number of used vehicles sold each month is already starting to increase.  The rise in demand could bring dealers some relief from their painfully thin margins,” Miller concluded.