“With the average new vehicle price having increased by approximately 22% from R151,536 in 2003 to R184,560 in 2008, it would seem that used cars may just be the right substitute in today's tight economic climate,” said Brand Pretorius, CEO of McCarthy Limited, the automotive division of the listed Bidvest Group.
According to Pretorius there are specific realities in relation to the used car market that are leading to outstanding value being offered at present. Most notable is the fact that used vehicle selling prices have declined significantly in real terms, over the past five years.
He said the average used vehicle selling price only went up by 4.5% from R97,996 in 2003 to R102,452 this year.
“Reduced trade-in values have definitely resulted in lower selling prices and a much wider gap between new and used vehicle prices,” he said.
High levels of stock are giving rise to an intensely competitive trading environment. A major reason is that bank repossessions are at an all time high with some 6,000 vehicles per month being reclaimed by the financiers. “On top of this, car rental companies are also defleeting on an ongoing basis from a base of around 48,000 vehicles. Lastly, dealers are recycling demonstrators at shorter intervals and selling them at much depreciated values.”
Although the concern in some potential customers' minds might be the maintenance and repair history of used vehicles, used cars purchased from reputable dealerships are low risk, good value acquisitions.
For example, at McCarthy dealerships all used vehicles are offered with title and mileage guarantees, as well as seven-day exchange plans and extended warranties. Moreover, competitive finance options and insurance plans are made readily available to customers.
He said the group's used vehicle sales for the 2008 financial year, which ended on 30 June, increased by 9.9% to a new record total of 42,182 units, compared to 38,384 in 2007.
In line with the national dealer market, McCarthy's new vehicle sales for 2008 declined by 12.2% to 44,435 units, compared to 50,605 units in 2007. “There is now strong evidence in the market of a swing from new vehicles to used vehicles, similar to what we experienced between 1999 and 2002. It is quite likely that total used vehicle sales (including private to private sales) will be double that of the new vehicle market this year,” concluded Pretorius.
