You're working from home, spending a lot less time in traffic, and not driving nearly as much as you used to. Yet this might be the best time to buy a new car.
It seems like a strange argument, doesn't it? After all, as Lebogang Gaoaketse, Head of Marketing and Communication at WesBank Vehicle and Asset Finance, points out: "With fuel sales down between 20% and 25% and public transport demand around 30% lower, people are simply moving around less.
He adds that the state of South Africa's economy means that everyone is tightening their household budgets; and if someone is going to make a big-ticket purchase, it's more likely to be property, as more people move to #WFH.
Still, in October 2020 the National Association of Automobile Manufacturers of South Africa (Naamsa), recorded 38 752 new vehicles sales – making it the fourth consecutive month of sales growth by volume since the national lockdown kicked in on 26 March that year.
The reason for this growth is South Africa's low interest rate. In December 2020 the South African Reserve Bank's key repo rate was 3.5%, which means that the prime rate consumers pay is 7% – the lowest since 1966. What's more, those rates could remain low for some time still.
"We expect interest rates to remain low for quite some time, as government continues to make every attempt to stimulate the economy," Gaoaketse confirms. "This provides [buyers with] a good opportunity to buy a vehicle at some of the most affordable lending rates possible."
What does that mean for you? Well, without getting too technical, it's worth noting firstly that the interest rate you're charged on loans will almost always depend on your personal credit risk – stipulated at Prime +X % or Prime -X% (depending on your risk profile).
Automark, Toyota's certified used-car programme, says that while 7% isn't necessarily the interest rate you'll be offered by a bank when you finance a vehicle, the interest rate will almost certainly be linked to the repo rate.
That means that when the repo rate goes down, the interest rate you pay will go down by the same margin, which also explains why Wesbank saw an uptake in fixed-rate vehicle financing deals in 2020.
So, yes, now's a great time to buy a new car! But instead of opting for the sweet (expensive) ride you previously couldn't afford, rather stick with a 'modest model' and take advantage of the low interest rate to pay less for it, or to pay it off quicker.
After all, the cheapest car is the one that's paid off.
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This article is for informational purposes only and should not be construed as professional advice.