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Buying a Car During and Post-Pandemic | Auto & General

Thursday, 26 November 2020

The global Covid-19 pandemic has disrupted South Africa’s economy, unsettled numerous sectors and made life a little more unpredictable – which has left those who were planning to buy a house or a car wonder whether now is still a good time to do so.

Consumer confidence dropped and many South Africans hit the pause button on their long-term investments as the country went into hard lockdown in late March. According to TransUnion SA, finance deals for new and used passenger cars dropped by 11.9% and 12.2% year-on-year between the first quarter of 2019 and 2020.

Since lockdown, the country, much like the rest of the world, has experienced widespread job losses as businesses across numerous industries closed. Unemployment rates for the first quarter (prior to hard lockdown) were 30.1%, according to Stats SA. While the South African Reserve Bank predicts that the nation’s post-coronavirus unemployment rate will be as high as 50%.

 

Incentives to buy new cars

While a slow and gradual phased-in approach for all nationwide car sales was permitted as of 13 May, under strict conditions, many cautious consumers are undertaking a practical ‘wait-and-see approach’, as the true economic effects are being felt.

The National Association of Automobile Manufacturers of South Africa (NAAMSA) painted a stark picture. New vehicle sales during the second quarter of 2020 experienced the biggest quarterly decline on record with a decrease of 63.4% compared to the same time last year.

As the economy reopens, individual car dealerships and the automotive industry, in general, are trying to incentivise potential buyers with competitive deals and additional benefits. If you’re in a stable economic position and have some savings, now is the best time to find a deal on a new or pre-owned car, as supply outstrips demand.

Some car dealers are forgoing an upfront deposit, while others are deferring the first repayment for at least three months to encourage consumers to spend their money during these trying times. Still, car dealers are offering free or greatly discounted third-party services, such as car insurance and monthly car washes. Now is the best time to shop around and compare various deals. Don’t be afraid to negotiate.

 

The lowest interest rate in half a century

If there was ever a time to save on interest repayments this is it. The South African government is trying to jumpstart the economy by dropping interest rates by 300 basis points to 7% – this is the lowest it has been in half a century. The interest rate is predicted to remain stable until the end of the year and is unlikely to increase again until at least 2022.

For consumers looking to make a long-term investment, this is very positive news, as they will have to pay back less interest on the money they borrow from the bank, which also adds up to lower monthly instalments.

Make sure that you can indeed afford the monthly instalment and car insurance, and still put aside enough money each month for any unexpected maintenance, repairs, or service if the pre-owned car is out of warranty. Use this car finance calculator from Auto Trader to do the maths.

 

Inflation is on the rise

While that’s all good news, it’s also important to consider that consumer inflation rose to above 3.2% in July – a 45% increase from 2.2% the previous month, according to Statistics South Africa. This was predominantly due to increased fuel prices, (up by R1.72/l in July) alongside water, electricity and municipal tariff hikes. There are predictions that consumer inflation could increase further to over 4% in the coming year. This means that consumers should expect to pay more on their monthly spending, which will place increased pressure on their disposable income.

 

What is the impact of rental companies going bankrupt? 

If South African car rental companies go bankrupt, as Hertz did in the United States, they will be forced to liquidate their vehicle fleets. This will result in the used car market being flooded with even more supply than demand. This could translate to reduced residuals for car owners of the same vehicle models that flood the market, which is bad news if they are looking to ‘downsize’ and want to trade in their current vehicle, as they will get less for it.

According to TransUnion SA’s Vehicle Pricing Index (VPI), more used cars were sold than new cars between the final quarter of 2019 and the first quarter of 2020. The used-to-new vehicle ratio illustrates buying trends, which increased from 2.09 to 2.13, respectively

 

Consider locally manufactured cars

Seven car manufacturers (Toyota, Ford, Volkswagen, Nissan, BMW, Mercedes and Isuzu) produce cars for the domestic market as well as for export. In fact, South Africa has the largest automotive industry in Africa with a production line of over half a million cars. Without the need to pay import tariffs and other taxes, these locally manufactured car brands are somewhat more affordable in our local market.

 

Search online

Save yourself the time, petrol, and stress of shopping during a pandemic and going between dealerships. After researching the various makes and models and shortlisting a few, search online for good deals. Make an appointment with the dealership and take the car for a test drive.

There are many opportunities for car buyers right now to get a good deal on a new or second-hand car, so spend a bit of time looking.

 

Once you find the right car, you’ll need the right insurance before driving it off into the sunset - you can rely on Auto & General for car insurance backed by decades of experience. Get in touch to talk to an expert consultant about your car insurance needs today - before it's too late. 

 


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