Vehicle financing under strain as costs rise and consumer affordability declines

SOUTH Africans are stretching their finances further to afford cars as vehicle prices continue to rise faster than household incomes, according to a new Absa report presented at the inaugural DealerCon event on Thursday.

- YOGASHEN PILLAY

Henry Botha, executive for strategy and product at Absa Vehicle and Asset Finance, said the vehicle finance market is expanding but affordability has deteriorated sharply.

“Applications have increased by 65%, averaging 5% growth per year. Income levels have risen by 35%, and the value of vehicles being financed has grown by 54%. The catch, however, is that affordability has deteriorated? Botha said.

“Ten years ago, the average monthly instalment represented 14.3% of a customer’s income. Today, it’s 16.1%. That's a significant shift. What does this tell us? It tells us that while demand is growing, consumers are stretching further. Vehicles are becoming more expensive, and incomes aren't keeping pace. This not only signals economic strain, but also of changing priorities”