South Africans are buying cars again, but trends are changing
While many consumers still faced financial strain in 2024, their confidence levels appear to be improving, with more people looking to buy cars last year. Thanks in part to the slight decline in interest rates in 2024, Standard Bank Vehicle and Asset Finance (VAF) recorded an increase of over 5% in vehicle loan applications. This is a stark contrast to the previous two years, when vehicle loan applications remained subdued.
“We experienced the first interest rate cut in September 2024, marking the end of the interest rate hiking cycle that began in November 2021. So, it’s not too surprising to see this slight boost in the car market, which became more pronounced in the last quarter, as we had seen two rate cuts by then,” says Derick De Vries, Head of Automotive Retail at Standard Bank Vehicle and Asset Finance.
The South African Reserve Bank began its rate-cutting cycle in September with a 25-basis-point cut, followed by another 25-basis-point reduction in November and again in January this year.
Standard Bank’s vehicle sales also benefited from the launch of a new secured online application feature on the Standard Bank banking app. By going to the “Explore Products” section and choosing vehicle loans, existing customers can apply for finance through the Standard Bank mobile banking app, with all their personal information pre-populated, making the process easier and quicker. If the customer’s details are not pre-populated, they can easily register their device using the Digime process within the app to have their details pre-filled, which further boosted Standard Bank’s sales.
In the last quarter of 2024, Standard Bank recorded a 9.3% quarter-on-quarter increase in vehicle loan applications – the highest quarter-on-quarter rise in the past two years. Over the previous two years, the third quarter typically brought the highest application volumes.
“This has resulted in higher loan disbursements in 2024 because not only were applications higher, but consumers’ affordability improved,” adds De Vries.
However, while the increasing application volumes indicate a recovery in consumer confidence, the data shows that more people are still opting to buy used cars instead of brand-new vehicles.
The percentage of new cars financed dropped to around 30% of all vehicles financed by Standard Bank in 2024, compared to a third in 2023.
“While this might not seem like a sharp decline, it’s staggering when you consider that 35% to 40% of all cars we financed a decade ago were new,” notes De Vries.
Another interesting trend highlighted in Standard Bank’s data is the higher application volumes in January, potentially driven by people starting new jobs, receiving salary increases, or reassessing their finances. In contrast, vehicle finance applications tend to dip in December, reaching levels lower than the average recorded in the preceding 11 months. Historical festive trends also show that applications consistently drop in December but rebound in January to levels higher than the prior year’s 11-month average.
“This could be attributed to the holiday break impacting activity in December, but consumers always return in January,” says De Vries.