South Africa

Pre-owned sector grows under Level 3 of lockdown

Pre-owned sector grows under Level 3 of lockdown

The total value of second-hand car sales rose 42% in June compared to May.

This is according to data from automotive classifieds portal AutoTrader, whose CEO George Mienie said the growth augurs well for the further restoration of consumer confidence. Vehicle searches increased to 43.9m in June from 39.9m the previous month.

The company claims that more than 25,000 used vehicles, tallying R7.3bn were sold during June, versus 17,000 in May at a value of R4.9bn.

In an exclusive interview with Sowetan Motoring, Mienie noted that searches in May 2020 were higher than the same month in 2019, saying he was positive that the used car market could achieve a sense of normality this year, albeit at the expense of new car sales.

“It remains to be seen whether these trends are pent-up demand or consumers ‘resetting’ their lifestyles.”

According to Mienie, vehicles in the hatchback and double-cab categories were shown to be especially resilient in current conditions, “with prices still holding their pre-lockdown figures and data indicating the fastest growth”.

“Delivery vehicles also seem to be very popular as entrepreneurs start businesses, even during this time.”

He offered four tips to cash-strapped buyers wanting to save money in tough economic times. The first, being a downgrade in vehicle. “This reduces monthly cash flow drains and potentially puts a lump sum in the consumer's pocket.”

Mienie advised trading “sideways” to a vehicle with greater fuel efficiency and less burdensome maintenance costs. “While the world is going green, diesel cars are still more fuel efficient and less costly on maintenance than their petrol counterparts.”

Shopping for new insurance quotes and exploring pay-as-you-drive policies, as well as a more conservative driving style to save fuel, were also recommended. With reference to the expedition towards digitisation in businesses, Mienie said dealership transitioning was more important now than ever.

“Many dealers think that merely adding online capture forms for things like finance, is becoming a digital dealership. This is only half true, to really save costs and become a digital dealership, the dealership needs to ‘automate’ the back end systems and many dealership processes.”

He said cars should be re-priced more regularly, with live adjustments akin to a stock market. “Being smart about marketing spend during these times is also very important. Understand the whole marketing funnel rather than fixating on 'advertising' and ‘leads’.”

Asif Hoosen, head of retail, planning & supply chain at Audi South Africa, said its pre-owned business is poised to “experience relatively stronger demand for used vehicles than that of new vehicles”.

“Customer affordability remains a key consumer pressure point and that combined with a new car pricing cycle, renders pre-owned vehicles very attractive,” he said.

“In terms of Audi pre-owned, models such A1, A3, Q2, Q3 and Q5 have consistently maintained good resale values in the premium market over many years and remain popular among consumers.

“It is important to remember that the premium market in South Africa has been experiencing a decline over the past five years.”

Hoosen attributed the buy-down trend to several factors, including a weakening economy, exchange rate fluctuations and new car price increases, culminating in reduced spending.

“While the buy-down trend has negatively impacted premium new car retail volumes, it has, as a consequence, positively resulted in the pre-owned market becoming more appealing, with easier access to premium mobility.

“My advice to prospective Audi customers is to always ensure that they consult with an Audi franchised dealer for access to the best Audi pre-owned vehicles supported by the Audi pre-owned promise of vehicle quality and integrity, backed up by premium customer service and brand security.”

He said approved dealers were also likely to offer the best prices for Audi trade-ins and presented the view that franchised dealerships would be more concerned about long-term customer value.

Speaking about new practices in the vehicle trade, Hoosen said, “In both the sales and aftersales side of the business, we need to invest in adapting our processes to encourage a ‘touch-less customer experience’ to provide customers with adequate peace of mind and encourage their patronage.”

On the sales journey ahead, he anticipates that the biggest losers would be in the C- and D-segment sedan markets. “The majority of premium vehicle buyers are considering body-styles with more practicality and lifestyle appeal, which is why there is a growing trend from sedans into sport-utility vehicles.”

Jason White, joint venture head of WesBank’s InspectaCar Finance, described an increase in consumer application activity since dealers were allowed to commence trade in May. “June 2020 saw a surge of 32.5% compared to the same time last year.”

White said the days of walk-in customers at dealerships are over, providing opportunities instead for retailers to consider their online and social media capabilities.

He forecast that sales in luxury and sports car segments would be impacted the most as the economy reels from the blows of Covid-19, but said that now is “unquestionably” a good time to buy a car.

“Particularly if a customer has reached their break even point - where the settlement is almost equal to the trade price of their vehicle. Perhaps a more affordable, lower mileage and more economic vehicle is the way to go, considering the uncertainty in the economy.”

Mark Dommisse, chairperson of the National Automobile Dealers’ Association (Nada) echoed the sentiment, adding that there are compelling purchasing opportunities for buyers in the new market too.

“The fuel price - though recently increased, but lower than before lockdown started - coupled with the lowest interest rates we’ve seen in years, will also create buying opportunities for consumers.”