New car sales to slow down: TransUnion

2011-03-18 14:13

Johannesburg - Vehicle risk intelligence company TransUnion Auto Information Solutions (TransUnion Auto) said on Friday it expected slower volume growth of about 5% to 10% this year.

TransUnion Auto also said used car margins were likely to continue to come under pressure throughout the year.

Despite a fantastic start to 2011 for new vehicle sales (year to end-February passenger vehicle sales up 26%), overall growth in the new vehicle market is also expected to slow to around 12% to 15% through 2011, TransUnion Auto said.

"The 25% growth rate of 2010 is in all likelihood unsustainable, though I'd happily be proved wrong at the end of the year," said CEO Mike von Höne.

Speaking at the biannual TransUnion Auto Trends Forum in Sandton, Von Höne said the outlook for the vehicle market in 2011 was generally positive.

"Market sentiment is recovering. In line with recovering sales of both new and used vehicles, more vehicles are being financed with financial agreements for both segments having increased steadily since May 2009," he said.

In addition, the upward trend in new financial agreements continued in January, increasing by 5.7% year-on-year. Used financial agreements grew by 6.8% in the same period.

"The good news for consumers is that finance is becoming more available with approval rates for new vehicle contracts increasing steadily to around 35% at present. However, banks are requesting larger deposits from 'marginal' customers," Von Höne said.

Overall statistics from TransUnion Credit Bureau reveal that the consumer debt to income ratio is improving and that overall arrears for "big ticket items" (mortgage bonds and asset finance contracts) was improving, TransUnion Auto said.

Von Höne said it was not all that long ago that vehicle financing contracts had an upper repayment period of 60 months. Today, less than one third of contracts have a repayment period of 60 months or less.

"The fact is that there is an increasing trend for the contract terms for new vehicle financing agreements to be greater than 72 months indicates that contract periods are being extended to make the repayments more affordable.

"A substantial 22% of all vehicle financing contracts fall within this category compared to 45% for between 60 and 72 months," Von Höne said.