It may have taken a while, but the effects of high interest rates in South Africa are now really starting to catch up to the consumers. New vehicle sales declined last month for the first time in five years. It is not only due to the high interest rates that sales have gone done but other factors such as rising inflation and high household debt have played their part.

The statistics released show that sales in January dropped by 9.4% compared to January 2007. Passenger car sales dropped by 14.6% over the same period but medium and heavy commercial vehicle sales rose by 14%. The rise in sales of medium and heavy commercial vehicles is a good sign that the South African economy is growing as this indicates a string spending on infrastructure development.

Maybe now that the interest rates seem to have stabilised, consumers will have a bit more confidence and go out and buy new cars but with the way things are looking, not too many people are going to be running to their car dealership looking for a new deal. Consumers in South Africa are under a lot of pressure. Most are heavily in debt. Figures show that household debt is at 77.5% of disposable income in the third quarter of 2007. Coupled with increasing fuel prices and food prices one would tend to think that purchasing a new vehicle would be the last thought on ones mind.

Chances are the motor industry could turn into a buyers market as sales continue to drop. Most car dealerships are now offering a lot of specials on their new cars in a bid to push sales. As the saying on the stock market goes, “Buy low and sell high.” It may not be a bad time to buy a new car now if the prices are low and you get a good financing deal. One should just make sure they are able to afford the repayments as car repossessions are set to increase due to consumers not being able to afford their repayments anymore.

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