The rand’s strong rally in recent weeks has contributed to a significant drop in new vehicle price inflation, with data released by TransUnion’s latest Vehicle Price Index (VPI) indicating that inflation dropped to 2,4% in fourth quarter of last year – dramatically down from 9,4% at the end of 2016.

With new car price increasing at a rate well below Consumer Price Index (CPI) for a second consecutive quarter, the demand has shifted from consumers predominantly purchasing used cars to more consumers buy new vehicles.

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This, says TransUnion’s Head of Auto Information Solutions Kriben Reddy, has enabled car manufacturers to reduce new car prices and that’s why there hasn’t been a better time to buy a new car.

“The current market is experiencing the real effects of supply and demand. If we look at where we have come from, the weaker rand saw new vehicle prices increase above inflation in previous reports, as input costs were higher,” he says.

“This significantly widened the pricing gap between new and used vehicles and shifted consumer demand in favour of used vehicles. As we shift out of this market trend, we will see a change in consumer behaviour, as they take advantage in the drop of new vehicle prices.”

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In addition to the strength of the rand, car manufacturers have also slowed down price increases in an attempt to help dealers sell more new cars, as high demand has significantly diminished the supply of good quality used cars.

Current data shows that vehicle finance houses are financing 2,22 used cars for every new car they finance.