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Wednesday, May 29, 2024

Millennials, Gen-Zs still opt for private mobility in depressed economy

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South Africans, aged 35 and below, are continuing to demonstrate a growing preference for private mobility, WesBank revealed yesterday.

These insights showed a consistent increase over the past three years in the number of vehicle finance applications for new and pre-owned cars by Millennials and Gen-Zs.

The upwards trajectory was tracked from 2021 when 722 505 vehicle finance applications were received from young people aged 35 and younger.

However, this number increased to 806 458 in 2022; and 826 088 by 2023.

WesBank head of marketing and communication Lebo Gaoaketse yesterday said this was contrary to previously held views by industry experts who suggested that a desire for private car ownership would wane among Millennials and Gen-Zs in favour of alternative forms of transport, such as e-hailing services.

“Vehicle purchases among this age group have indeed slowed down as reported in 2023 by data analytics firm Lightstone, which noted an 8% year-on-year decrease in 2012 and 2022 in the number of cars purchased by consumers below the age of 35,” Gaoaketse said.

“Viewed in conjunction with WesBank’s vehicle finance applications data, though, it becomes clear that the subdued sales are not a result of diminished desire for personal cars, but rather a symptom of a depressed economy and strained affordability across all age groups, including Millennials and Gen-Zs.”

Meanwhile, according to the TransUnion Q4 2023 South Africa Industry Insights Report (IIR) released earlier this month, the new credit activity growth was led mostly by Gen-Z and Millennial consumers, who together accounted for 61% of new products originated during the quarter.

Gaoaketse said manufacturers, dealerships and finance houses have ramped up their incentive programmes to stimulate sales in recent times by offering discounts, innovative finance structures, and extended loan terms to ease the load carried by consumers seeking to purchase a car.

“For recent graduates who might not have a credit history, WesBank introduced a Graduate Finance programme, which grants young people access to vehicle finance despite not having a credit record,” he said.

“However, more needs to be done to help young South Africans attain their aspiration for safe and reliable private mobility, which in many cases can also be a key consideration for a successful job application.”

This comes as domestic new vehicle sales continued to decline in March, falling by 11.7% compared to vehicles sold in the same month last year as a result of the constrained business environment, amplified by weak consumer demand and the recent Easter holidays.

For the first quarter 2024 aggregate new vehicle sales were now 5.3% below the corresponding quarter in 2023, on the back of aggressive monetary policy stance by hiking interest rates in an attempt to contain inflation and elevated fuel prices.

Gaoaketse advised that despite the economic headwinds currently facing most South Africans, sound financial management remained critical for the maintenance of a good credit record, which influences lenders’ propensity to extend credit as well as the interest they charge.

“It might also be necessary for those seeking vehicle finance to consider more affordable alternatives in the pre-owned space or among value-oriented importers that have recently entered the local market,” he said.

BUSINESS REPORT

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