Car sales boom masks growing affordability squeeze

Strong growth in vehicle-finance applications suggests South Africans are returning to showrooms, but banks say buyers are increasingly prioritising value and restructuring their loans to keep monthly repayments manageable.

New data from major vehicle financiers shows applications continued to rise during August, alongside the 11.4% year-on-year increase in new-vehicle sales reported by Naamsa.

The automotive industry body said 57 898 new vehicles were sold during August, up from 51 973 in the corresponding month last year.

Passenger-car sales increased by 11.6%, to 41 216 units, while light-commercial vehicle sales rose by 11%, to 13 727.

Toyota continued to lead the market, with the Hilux retaining its position as South Africa’s best-selling vehicle, with 3 881 units sold in August.

WesBank said 85 633 applications for new-vehicle finance and 132 053 for used vehicles were submitted during the month — a combined 217 686 applications. The figures demonstrate substantial demand for credit, although application volumes cannot be directly compared with sales because not every application is approved; consumers may approach more than one lender and some transactions are concluded without bank finance.

Responses from Standard Bank and Absa indicate that the growth in showroom activity is being reflected in finance applications, particularly for new vehicles.

Mothusi Dire, Standard Bank’s head of vehicle and asset finance product and value propositions, said its applications for new-vehicle finance increased by about 15% between August 2025 and August this year. Demand for used-vehicle finance remained broadly unchanged.

“The double-digit growth Naamsa has reported in new-vehicle sales is translating into materially stronger new-vehicle finance,” Dire said.

Absa Vehicle and Asset Finance said it continued to receive more than 200 000 applications a month, with its total August volumes rising by 13% year on year.

Henry Botha, the head of strategy and business analytics at Absa Vehicle Finance, said the strongest growth came from the new-vehicle segment, although used-vehicle applications also remained resilient.

Approval rates at Absa were stable compared with August last year. Botha said applicants’ credit health and repayment behaviour remained the main factors determining whether finance was granted.

Standard Bank did not disclose its approval rate, saying it assessed customers according to the affordability requirements of the National Credit Act.

The banks’ responses suggest that rising applications reflect a stronger consumer appetite but not necessarily a wholesale improvement in households’ ability to afford vehicles.

Standard Bank said the average loan amount requested during the first half of 2026 was about 10% higher than in the same period last year. This was substantially above the 0.8% new-vehicle price inflation measured by TransUnion.

Standard Bank said customers were not increasingly relying on deposits to reduce their debt. Instead, demand for balloon payments had risen gradually and consistently over the past 18 months.

Balloon payments reduce monthly instalments by deferring part of the debt until the end of the agreement. However, consumers must eventually settle or refinance the amount and might owe more than the vehicle’s trade-in value if depreciation outpaces repayments.

The trend suggests that many buyers are managing affordability through the structure of their finance agreements rather than larger upfront contributions.

Absa said customers were also becoming more value conscious as living costs and elevated interest rates continued to weigh on household budgets.

The shift has started to moderate growth in Absa’s average loan values, despite continued demand for finance. Consumer resilience has been supported by headline inflation, which moderated to 4.3% in July. However, the repurchase rate remained at 7%, leaving the prime lending rate at 10.5% and keeping the cost of borrowing relatively high.

Standard Bank said most customers had absorbed the pressure created by borrowing costs and higher fuel prices without falling behind on repayments. It was not seeing a broad-based deterioration in arrears.

Nevertheless, the bank warned that stress could emerge among financially vulnerable customers if economic conditions failed to improve and accumulated household savings continued to decline.

The finance data points to a vehicle market recovering on the back of real consumer demand. However, it also reveals a buyer who is calculating carefully — seeking better value, borrowing more selectively and increasingly using balloon payments to keep a new car within the monthly budget.

Sunday World