The automotive sector gives a pretty good insight into what is happening in the wider economy, so it is always useful to get a perspective from vehicle finance house WesBank. Their Q2 Vehicle Sales Confidence Indicator was presented this morning by Cyril Zhungu, General Manager of WesBank’s Motoring Division. Here are a few highlights:
– Negative factors affecting the environment include low GDP growth, high fuel prices, rising inflation and interest rates.
– There was a slight drop in confidence in the latest quarter, of 5.5%, Q on Q, or 12.7% year on year. Despite this, there is some positive sentiment in the market.
– There is a move to buy used cars from new ones, as consumers continue to look at price and value.
– Labour disruptions remain a big concern. BMW and General Motors plants are already affected by the latest strike.
– Applications for finance have been artificially boosted by the credit amnesty in April.
– Customers are taking steps to stay in the market and still purchase vehicles – by structuring transactions to maximise the repayment period, but the average contract period is stabilising around 68 months.
– People hold on to cars for longer. Around 36 months on average.
– Manufacturers are stimulating the market with incentives.
– A lot of people seek so-called balloon payments, where there is still a sum owing at the end of the contract time, to make vehicles more affordable. At around 18% of transactions.
– Cost of motoring continues to rise. The cost of fuel is the big factor putting customers under strain – affecting confidence levels.
– Any big hike in interest rates will have a huge impact on the economy.
– A fall of 3% to 5% in vehicle sales is predicted for this year.
– If there is protracted industrial action, it will have a significant impact in the second half of this year.
– Repossessions have ticked up, together with arrears. The rise for WesBank hasn’t been as significant as in previous downturns, as it has become more prudent about its lending.
People continue to buy cars, and to finance them, but it is tough out there, with motorists under strain and the economy limping along. We must keep an eye on this sector for continued information on the real impact of rising fuel prices, higher interest rates, e-Tolls and other horrors.
On what must be the coldest day so far this year, a cold breakfast buffet was on offer. To add to the discomfort it was served outside in an open area with a canvas roof. WesBank may know a lot about cars, but if you are ever invited to breakfast by them, be advised to eat before you get there.
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