New and used vehicle prices have been growing rapidly over the past three years since the onslaught of Covid-19, with rising inflation and interest rates adding even more strain to consumers’ budgets.
On average, the value of new-car finance contracts shot up by 15% between Q1 2019 and 2022 – approximately 5% a year – and that of a used-car contract rose by an even more extreme 31% between the same periods, which works out to 10% annually, according to data provided by WesBank.
However, with the winding down of Covid regulations and subsequent increase in new-vehicle stock levels over the past year, it seems that used-car prices aren’t going up that steadily anymore.
With the rising supply of new cars, demand is now funneling back to this segment and out of the pre-owned category, and this is visible in the numbers.
Between Q1 2022 and Q1 2023, the average value of a new-car finance agreement experienced an 8% jump, but used-car agreements saw a far less severe expansion than in the years prior of 5%.
There is one consistent factor over time, however, and that is the average length that South Africans finance their vehicles for.
For new cars, the average contract length stood at 68.5 months in Q1 2019, 67 months in Q1 2022, and 67.5 months in Q1 2023. For used rides, it came in at 69 months, 70 months, and 71 months, respectively.
These discrepancies aren’t major enough to draw serious conclusions from. However, they show that consumers finance their vehicles for a considerable amount of time, usually close to six years.
Lengthy contracts paired with high lending rates mean a significant percentage of the average person’s monthly car payment is allocated to paying interest.
“South Africans have a strong affinity for their cars, and we are witnessing a rise in applications for both new and used vehicles monthly,” said Lebogang Gaoaketse, WesBank Head of Marketing and Communication.
Average length and value of a car finance contract in South Africa
In the following tables, you can find the average length and value of a car finance contract in South Africa before and after the Covid-19 pandemic, painting a semi-accurate picture of how much car prices really jumped during this time.
New cars
| Period | Average contract value | Average contract length |
|---|---|---|
| Q1 2019 | R316,778 | 68.5 months |
| Q1 2022 | R365,746 | 67 months |
| Q1 2023 | R393,441 | 67.5 months |
Used cars
| Period | Average contract value | Average contract length |
|---|---|---|
| Q1 2019 | R210,387 | 69 months |
| Q1 2022 | R275,454 | 70 months |
| Q1 2023 | R289,134 | 71 months |
Keyword: Length and value of the average car finance plan in South Africa