Gauteng Business News

Send  Share  RSS  Twitter  06 Mar 2009

motoring: Still Some Good News on Motoring Horizon


Recent Gauteng Business News

In the face of dwindling new vehicle sales, there is still some good news on the motoring horizon for car buyers: according to Darryl Jacobson, managing director of Burchmore’s, used cars still represent a real bargain.

Significantly, used car buyers also stand a far better chance of being extended credit than new car buyers, because of the equity in pre-owned vehicles.

In February 2009, all four vehicle market sectors (passenger car, light commercial vehicle, medium commercial vehicle and heavy commercial vehicle) saw significant declines versus February 2008. And, on a year-to-date basis, the new vehicle market has contracted by 36.2%. But, despite these figures, Jacobson points out that there is still considerable demand for cars. “Transportation is a basic need in this country. In South Africa, you cannot be productive without a motorcar; there are currently no worthwhile alternatives in terms of public transport. Yes, new vehicle sales have dropped dramatically. But, in many cases, this is due to financing being declined. We have not experienced any drop-off in vehicle demand at Burchmore’s – primarily, of course, because we are offering exceptional value for money coupled with choice.”
Burchmore’s sells its vehicles at wholesale prices. As AndrĂ© Dalais, finance and operations director of Burchmore’s explains, this means that prospective buyers stand a far greater chance of securing financing: “The Credit Act is working to our benefit – it is far easier to get financing for one of our cars because there is more equity in the deal. Put simply, the value of the asset relative to the loan is a good proposition. Our customers have a better chance of getting financing, because we are selling at lower prices. As such, the bank has a ‘cushion’ so to speak.”

Dalais adds that used cars currently represent value for money like never before. “There is a massive gap between the pricing of new and used cars,” he explains. “The new car list prices have moved upwards very significantly – by 15 to 20% over the last six months, but the same hasn’t happened to used cars.”
As a result, says Jacobson, there is “huge value” in a used car. “Now is the time to buy; the gap will certainly close again,” he warns.

No one knows precisely when used car prices will rise. “The market is extremely volatile and historical patterns are no longer relevant; the buying behaviour of consumers is simply too erratic. We cannot predict exactly when this will happen,” Jacobson comments.

One thing is however certain: used car buyers should act now, because prices will rise. “They have to; used car prices always follow those of new cars. Furthermore, the shortage of good stock is only going to be exacerbated as demand outstrips supply. The message is clear: buy now,” concludes Dalais.

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