Used car prices on a down spiral
USED cars prices will probably continue to lose value until well into next year after having taken a pounding in the past seven months.
Bernard Duchen, managing director of Mead & McGrouther, publishers of the monthly Auto Dealers' Guide or dealers' "bible", says that increasing competition, innovative finance schemes and the proliferation of low-priced entry level cars such as the Opel Corsa, the Toyota Tazz and the slightly more expensive Volkswagen Polo Classic C will continue to put pressure on the second-hand market.
The guide is the sole reference used by motor dealers and the insurance industry to establish trade-in and resale prices of second hand cars as well as payouts for stolen cars or those written off.
Mead & McGrouther gathers its information partly from dealers. However, it also uses a sophisticated computer system to put a value on the make and model for each manufacturer.
Duchen says that in recent months, used car prices have fallen by between 12% and 23% "and, I just don't see the market improving".
Traditionally, manufacturers increased prices each quarter, but after Nissan cut them in May, other manufacturers were effectively prevented from doing so.
And developments in the new car market are immediately reflected in the used car sector.
Explaining this, Duchen says that motorists now view a new, entry-level car priced at below R45 000 in the same way they used to look at a used car in the same price range. In most cases the new car is purchased, leaving the dealer with a surplus of used cars on his showroom floor.
However, Duchen believes that the continuing decline in the value of the rand will eventually force all manufacturers to adjust price upwards, and this should give the used car market some relief.