BEHIND THE PRICE-TAG

• Published date: 18 May 2022
• Publication title: Sowetan (Johannesburg, South Africa)

Are we paying too much for cars in SA

Are we paying too much for cars in SA?

New cars are too expensive” is a sentiment you are likely to hear whenever pricing for a latest model is announced in SA.

A March 1994 edition of Top Car magazine listed the cheapest Volkswagen, a Citi 1.3 Shuttle, at R35,032.

According to an online inflation calculator, this is equivalent to about R239,346 in 2022. The least expensive offering sold by the German carmaker today is the Polo Vivo, priced from R235,200 (1.4 Trendline).

This means a basic instalment of R5,091.96 over 60 months at a 10% interest rate. For reference, a recent index by Bankserv Africa revealed that the average nominal take-home pay received by South Africans is R15,542.

What goes into the pricing of a new car?

Representatives of Toyota, local sales leader by volume, explained that the considerations behind new vehicle prices are varied.

“Fundamental factors include exchange rates, inflation, shipping costs – which have increased dramatically of late – commodity prices and taxes,” the firm said.

“Import costs amount to 50%, and then we would have ad valorem [a luxury excise tax according to value], VAT and customs duty. The cost of shipping has particularly been a challenge for the sector in the aftermath on the pandemic.”

“We have been experiencing shipping delays for both imported and local parts, there has been congestion at both global and local ports – including the Durban Port.

“Due to these factors, shipping and air freight costs escalated, air freight space has to be used more frequently, so not only is volume affected but pricing is now also impacted.”

The impact of lockdowns and restricted supply in source markets were additional factors cited, during a discussion with Audi. “It is important to note that pricing decisions go far beyond only determining a retail price,” the premium carmaker said.

“The product offering, perceived customer benefits and value for money are considered as well as the total cost of ownership such as residual values, finance schemes, service and maintenance, consumption, insurance and affordability on a monthly basis, incurred by the owner.”

Dealer mark-ups

Anyone browsing for a new vehicle will have identified the difference between a recommended retail price and the price a vehicle is advertised on the dealership floor.

Take the Corolla Cross, for example, which has a from-price of R360,400 (1.8 Xi) according to the Toyota website. Seek out an online classifieds...