This time a year ago, South Africa had faced its first interest rate hike in three years. A year later, the country faced its seventh consecutive increase during November, raising interest rates to a five-year high.
“The prime lending rate was only higher in 2009,” says Lebogang Gaoaketse, Head of Marketing and Communications at WesBank. “It will undoubtedly place the onus on consumers to seriously consider affordability when it comes to applying to finance, whilst those already in debt will be faced with increasing instalments thus pressurising household budgets.”
The latest increase in the prime lending rate to 10.5% practically means the monthly instalment on a R400,000 car finance agreement has increased by at least R695 in the past year. Over a 72-month agreement, a consumer would have to pay R50,000 more for their car.
Despite this gloomy reality, new vehicle sales during November were certainly unaffected as the market recovered from logistics upsets from the previous month. In fact, November sales were the second-best selling month this year by a small margin to March sales, coming in at 49,413 units, up 18.9% on November last year. This according to figures released by naamsa | the Automotive Business Council.
“November sales put in a fighting closing period for 2022, displaying the relatively constant recovery of the market throughout the course of the year,” said Gaoaketse, assuming the traditional slow-down in sales during December. “The strong performance of November sales has pushed the year-to-date performance back up to 13.6%.”
Passenger car sales increased 16.9% year-on-year to 32,859. The dealer performance in the sector was softer, increasing 12.6% to 25,358 sales, largely as a result of the strong performance of the rental market, with 6,575 sales during the month.
Overall, the rental market accounted for 7,285 sales, up 50.7% over November last year.
Light Commercial Vehicle sales performed well, up 20.8% to 13,477 units thanks to improved supply of stock. It was enough to turn the negative year-to-date growth during October into positive growth for 2022, the segment up 0.9% so far this year. The dealer performance in the segment increased 17.8%, recording 11,726 sales off showroom floors.
“As consumer confidence grows in the wake of slowly improving economic conditions, we expect the new vehicle market to continue its recovery,” concludes Gaoaketse. “However, the headwinds of load-shedding, the political outlook, and the sheer reality of the increased cost of indebtedness will continue to put pressure on just how well new vehicle sales will perform in 2023.”
