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Car Buyers Willing To Travel For Best Price

Aug 26, 2014 sales, carprices, business

Car Buyers Willing To Travel For Best Price

 

Following a study conducted by Lightstone in 2013, the differing purchase price of vehicles from province to province has been a topic of interest among those within the motor industry. The latest insight released by Lightstone reaffirms the fact that purchasing a new or used vehicle in one of South Africa’s “economic powerhouse provinces” can prove to be a wise move, financially.

 

Factors affecting price per province

Paul-Roux De Kock, Head of Analytics at comprehensive data provider, Lightstone, notes that it is no surprise that stock availability, market competition and population density (which allow access to a wider consumer base in the various provinces) are among the factors that have an effect on the prices consumers end up paying for vehicles. “The increased number of car dealerships and stock availability in SA’s biggest provinces can drive down prices as dealers offer better deals to compete for the business of potential buyers. Gauteng caught up to KZN and is now jointly the second cheapest province to buy cars in, with prices 0.4% lower than the national average. Western Cape remains the cheapest with 0.6% below the national average.


City of Johannesburg also moved up from being the 10th cheapest municipality to being the 7th cheapest municipality to buy second hand cars. Vehicle prices in this municipality are currently 2.1% below the national average. In the less competitive markets, the motor dealers will be less likely to offer competitive deals - such as in the Blue Crane municipality where vehicles are being sold at 5.1% above the national average.”

 

While one might note vehicle prices differing from province to province, new vehicles are generally sold at the manufacturer’s specified price – irrespective of location. When it comes to second hand vehicle prices, they are not only determined by car specific factors like mileage, condition etc. but also by market supply factors like the stock availability of the vehicle in the area, as well as the demand for the type of vehicle. As an example, if a lot of people in Mpumalanga want to buy SUVs to deal with worsening road conditions, but only a small number of people are willing to sell their SUVs, it will create a market where dealers or sellers can demand higher prices for these vehicles. Each vehicle make, type and model will be affected differently by these market conditions.



Second hand car prices in coastal provinces can also be negatively affected by the (often perceived) effect that rust can have on the vehicle’s condition. It is interesting to note, however, that newer cars are increasingly making use of more advanced materials that are less affected by rust.

 

Impact on motor insurers

With vehicle prices fluctuating from province to province, it is essential that insurers are tracking these types of trends to better serve their clients. “Innovative insurers are already starting to incorporate location specific and geo-demographic factors in their rating engines and we expect to see more of this going forward. We might even see insurers of the future building customised products that will offer higher/lower pay-outs on claims dependant on where you live,” De Kock adds. A company such as Lightstone can track the location price distortion for individual vehicle types, and using their award winning* LIVE Inspect app - which is specifically tailored for insurance companies to perform a pre-inspection at policy initiation - is something that is proving to be extremely valuable for those within the insurance industry when it comes to effectively evaluating and underwriting vehicles.

 

The internet is a great aid when it comes to expanding buyer's search outside of their immediate area. “With vehicle prices in the City of Johannesburg being 2% cheaper than Tshwane, it could be incentive enough for someone in Pretoria to drive the +-50 km’s to buy the car in JHB. To put that into perspective, that’s a saving of R4 000 on a car that’s worth R200 000. Including the petrol and tolls to drive from PTA to JHB and back again it will most likely still result in a nett saving” says de Kock.

 

So what is the message to dealers? Make sure you research your competition online and ensure that your online presence is attracting buyers to you, rather than away to another province.

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