Interest rate cut is good news for car buyers, says Naamsa

Further rate cuts should boost new car sales in 2025, says Mikel Mabasa

Vehicle purchases remain highly sensitive to interest rate movements given the predominant use of vehicle financing in the South African market.
Vehicle purchases remain highly sensitive to interest rate movements given the predominant use of vehicle financing in the South African market.
Image: Meta AI

Automotive umbrella body Naamsa has welcomed the latest 25 basis points reduction in the repo rate, saying it should help stimulate moribund vehicle sales.

The South African Reserve Bank’s (SARB) monetary policy committee cut rates for the third-consecutive time this week, with the prime interest rate now at 11%.

“Vehicle purchases remain highly sensitive to interest rate movements given the predominant use of vehicle financing in the South African market,” said Naamsa CEO Mikel Mabasa.

“The rate cut represents a critical intervention in supporting economic recovery, particularly in the automotive sector, which has been under sustained pressure.”

Mabasa said at the start of 2024 the domestic new vehicle market was just 0.9% below its pre-pandemic level of 536,612 units recorded in 2019. However, despite a seasonal uptick in the final quarter of 2024, vehicle sales declined to 515,853 for the year, 3% less than in 2023 and underscoring the need for supportive monetary policy measures.

“Lower borrowing costs will enhance vehicle affordability across all market segments, encouraging consumer purchases and facilitating fleet expansions for businesses,” he said.

“The SARB’s monetary policy stance signals the possibility of further rate cuts in the months ahead, should inflation remain contained. A continued downward trajectory in interest rates, complemented by easing inflation and stabilised fuel prices, could accelerate a much-needed recovery in new vehicle sales.

“Should the SARB continue with a measured approach to reducing interest rates in 2025, the domestic new vehicle market could see a single-digit percentage improvement compared with 2024 levels, marking the beginning of a much-needed turnaround for the industry.”

 


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