The used-car bubble in South Africa could be about to burst
The used car market has flourished in recent years, says vehicle sales platform AutoTrader – but with growing demand, prices have spiked, and there are signs that the bubble may be about to burst.
Comparing AutoTrader trading data between Q1 and Q3 in 2022 to the same period in 2021 indicates that the used car market has continued to thrive, the group said.
However, demand for used cars has driven up prices. The average list price of used cars for sale has increased by 10%, rising from R386,682 in 2021 to R427,290 in 2022.
“Off the back of strong year-on-year growth, search and advert views for the above period have grown by 5.64%. Searches are an indicator of popularity, advert views indicate interest in a particular car, while enquiries indicate the car consumers are most likely to buy,” it said.
More notably, supply has not kept pace with demand.
“While the seven cars sellers get the most enquiries about have remained unchanged, stock levels of these mostly locally-built cars have changed dramatically,” the group said.
Supply of the country’s best-selling passenger used car – the locally produced VW Polo Vivo – has halved, while the second most significant drop in supply in used cars has been the BMW 3 series (33%) followed by the locally-built Mercedes-Benz C-Class (17%) and VW Polo (16%), and imported VW Golf (11%).
In contrast, the supply of South African-built used bakkies increased. The group said that the Toyota Hilux – the car that receives the most enquiries – increased in supply by 18%, and the Ford Ranger by 3%.
Still, some worrying local and international signs point to a bursting of the used car market bubble.
“Locally, rising interest rates, inflation, and spiking fuel prices are likely to dent demand. With the cost of living continuing to rise, consumers are feeling the pinch,” AutoTrader said.
“What’s more, while South Africa lags overseas trends, worrying indicators are emerging abroad, not least of which is a drop in used car price inflation and concerns around the car loan debt market in the US.”
AutoTrader CEO George Mienie said that if the new supply chain issues and chip shortages for new cars are sorted out, there could be increased demand for new vehicles over the next period. This would put downward pressure on used car prices as demand falls.
“The used vehicle price inflation bubble is flexing and, under the right economic demand and supply conditions, could burst in the next 12 months as housing costs go up, interest rates increase, and car demands fall. I always say if the US or EU sneezes, we get pneumonia,” Mienie said.
Read: 10 most-listed used car variants in South Africa with price and mileage
