The most recent statistics on vehicle sales are clearly indicative of a tough economic climate that has many South Africans watching every rand. Under these challenging conditions, used car sales are experiencing an uptick.
But while buying a second-hand car might be the most financially viable option, it does come with a few risks. The good news is that by being proactive and paying attention to the finer details, South Africans can make sure their preloved purchases turn out to be smart choices in the long run.
The most recent figures published by Wesbank[1] prove the industry is under strain, with the growth of new vehicle sales sitting at just 0.8%. National car sale statistics provide a window into several key economic indicators, including consumer spending patterns, discretionary spending trends and the state of the automotive sector.
Runaway inflation and the series of consecutive interest rate hikes seen since the end of the pandemic are the main drivers of this downward trend. However, South Africans still need to get around, and to do that, they are opting for used vehicles. Wesbank’s applications for used car financing now outnumber those for new cars two-to-one, according to the latest report.
The findings of TransUnion’s most recent Vehicle Pricing Index (VPI)[2] coincided with this trend, with used vehicle prices experiencing a more significant increase than new cars in the third quarter of 2023. At 8%, this increase currently sits at about 3% above inflation.
“These figures show the used car market’s ability to bridge the gap created by rising prices and the increased cost of borrowing, but there are a few risks that come with buying a second-hand vehicle. When buying a car, it’s important to have a full understanding of its mechanical condition, whether there are any faults with its exterior and interior, and if all the registration documentation is up to date and available. All these factors could play a role in whether a car insurer honours a claim in the event of unforeseen damage or a complete write-off,” says Siyakha Masiye Spokesperson at MiWay Insurance.
To navigate these risks, Masiye provides some heads-up for South Africans who are considering buying a used vehicle:
Obtain the proper paperwork
When buying a used car through a personal sale or dealership, it’s vital to obtain the correct documentation and details. For example, the car buyer needs to make sure they obtain the car’s identity number, its VIN (engine) number and its chassis number (unique code). They will also need ta roadworthy certificate as well as its service history logbook. In addition, the previous owner or dealership must provide the new owner with a finance sale agreement.
The most important proof of ownership is the car’s certificate of registration, which will need to be updated post the sale with the new owner’s details. These documents need to be stored in a safe and accessible place, having them on-hand will ensure a hassle-free process when taking out insurance or processing a claim.
Weigh up insurance options before the sale
One of the ways to safeguard yourself against the risk of unforeseen accidents is to take out the appropriate amount of car insurance, As Masiye states, “Many car owners wait until they purchase their car before looking into what it would cost to insure. Instead, motorists should do some pre-purchase research and obtain numerous quotes from insurers on the car options they are considering.
In doing so, they will have a clearer idea of whether the insurance policy that will provide the best coverage is affordable and within budget. By doing this beforehand, insurers and brokers will also be able to give prospective car buyers valuable information on which makes and models cost the most to insure due to factors such as the cost of repairs, safety ratings, and theft rates.”
Do proper checks when buying online
Post-pandemic, online shopping trend has persisted, with more and more South Africans buying cars via online portals such as AutoTrader. Since the beginning of the year alone, AutoTrader has seen an 11% rise in the number of shoppers opting to buy their cars online.
While online shopping provides an unmatched level of choice and convenience, there are also a few snags that need to be avoided. Many online automotive marketplaces work in partnership with independent car dealerships. A good starting point is to verify that the dealer advertised is legitimate and properly licensed by checking their website or by requesting this information directly.
Another way of checking the legitimacy of the dealer is to research online reviews and client testimonials to make sure that they are renowned for good, post-sale customer service. Buying a car online doesn’t allow you to conduct a close-up inspection, therefore arranging an in-person inspection is highly recommended. Alternatively, if the location of the car is not locally based, you could arrange for a third-party inspection by a mechanic or car expert.
PERSONAL FINANCE