Debt fails to brake auto sales and wallpapers and wallpapers

car Review

Unlike the residential property market, the new vehicle market is not showing any signs that high household debt is holding back sales.

Figures from the National Association of Automobile Manufacturers of SA (Naamsa) on Wednesday showed that new passenger car sales in January grew by 22.1 percent to 32 977 from the 27 004 sold in January 2010 and the daily rate of new car sales remained at a three-year high.

First National Bank said this week the residential property market had slowed down further in January due to high levels of household debt relative to disposable income.

Auto industry analyst Tony Twine, however, believed the new vehicle market was moving in the opposite direction because high house prices were acting as an unbridgeable economic gap for borrowers. Twine said the lower quantum level of car prices was attainable and this was evident further down the price ladder moving into the used vehicle market.

Brand Pretorius, the chief executive of the McCarthy Group, said the new car market was being driven by replacement demand because all cars at some stage had to be replaced.

Pretorius said there was also quite a substantial swing from used to entry-level new vehicles because it was easier to get finance on a new vehicle.

“There is no doubt the enhanced affordability of new cars is the key driver of the significant growth we are seeing. The affordability picture is looking a lot better because of the modest new vehicle price inflation, low interest rates and extended repayment periods on instalment sales,” he said.

Sydney Soundy, the managing executive at Absa Vehicle and Asset Finance, said the residential property market lagged the new vehicle market, which had improved long before the housing market. He said Absa’s 2010 statistics indicated people changed their houses every seven years and their cars every three years.

Naamsa said sales of new light commercial vehicles, bakkies and minibuses last month increased 7.7 percent to 10 563 units compared with January 2010. Medium commercial vehicle sales rose 39.5 percent to 636 units and heavy truck and bus sales by 19 percent to 959 units in the same period.