To buy new or used … that is the question

Liana Shaw takes a look at the current state of the used-vehicle industry and the latest trends among buyers and sellers of used vehicles.

With the economy under severe pressure, South African consumers are being compelled to tighten their belts, and the business environment is being impacted. No sector of industry is immune, including the commercial transport sector.

Market indications are said to be pointing to a surge in the sale of used vehicles over new ones. This view is supported by original equipment manufacturer MAN, which claims that it is seeing a stronger demand for its pre-owned trucks and buses, often to the point where the demand exceeds supply.

Dave van Graan, head of special sales projects for MAN, says: “While the demand for new vehicles seems to show only slight growth overall (around five percent in the extra-heavy segment year on year), MAN and Volkswagen have been running ahead of this overall growth rate in the market, increasing market share by some 3,6 percent year on year January to June 2018.

“We are confident that the success of both new and used-vehicle sales is thanks to very hard work that we have put into our used-vehicle business over the last three years. This included the establishment of our international vehicle-return process, various levels of refurbishment, extended warranties on used trucks, repair and maintenance contracts at very competitive rates, as well as different channels to market.

“However, bear in mind that repair and maintenance costs automatically increase as vehicles get older, so, while principal debts of the vehicle may be substantially lower for a used vehicle, there is an increase in the risk of expensive, unplanned repair costs.”

Van Graan continues: “We have seen a trend where buyers of new commercial vehicles have ‘sweated’ their assets for a longer period because of lower utilisation, as well as due to political and economic drivers, which negatively impact business confidence, and hence the decision to replace is delayed.

“That being said, there is no doubt that new trucks, with extended warranties and maintenance and repair contracts, are still the first preference for many top operators.”

John Wolff, MD of Wolff Autohaus, reseller of commercial vehicles in Gauteng’s West Rand, appears to second this notion. “I cannot say that we have noticed a marked increase in our sales compared to two years ago, or even last year,” he states.

“The second-hand truck market seems to be getting tougher for a variety of reasons. In fact, the market for both new and used trucks is soft. Most of our buyers are small operators with two to three vehicles in their fleets, whereas the bigger fleet operators choose the newest models with low mileage. The used-truck market is not as buoyant as it was in the past, with operators tending to run vehicles for longer before replacing them.”

He explains that because transport companies tend to look for work/contracts that are available at the time, the choice as to whether to run with new or used vehicles largely depends on the mileage, age and condition of the vehicle, the length of the contract and the scope and type of work they are being required to undertake.

“Wherever used vehicles are the preferred choice, we endeavour to accommodate the client in every way possible, including meeting their budget constraints and adhering to delivery times.

“Our delivery times are a few days, and sometimes even that same day,” says Wolff.  “Our vehicles are fully equipped with a spare wheel, jack, a roadworthy certificate and other necessary accessories.

“We prepare our vehicles in our own mechanical workshops and spray-painting facilities, which gives us greater control of the end product.

“However, current trading conditions are tough. The market is diverse with varying requests in terms of type and brand, ranging from the start-up transporter to the established company – all searching for the best deal to suit their requirements,” he adds.

According to Gert Fourie, MAN’s head of TopUsed, in order to minimise the risks associated with running older, used vehicles, pre-owned vehicles are taken in to the company’s Centurion facility after their first economic life by following a very fair international vehicle-return process.

This ensures that the intake quality of the used vehicle is at the required standard for one in that particular operation, having completed a certain number of kilometres.

Once returned, the company’s TopUsed repair team will refurbish these vehicles to a one-, two- or three-star specification standard, with the highest standard qualifying for a one-year factory-backed warranty. He adds that, due to the refurbishment and repairs, MAN is able to offer repair and maintenance contracts at very competitive rates to its clients.

These vehicles are then made available to the dealer sales network via an on-line stock portal. Furthermore, if required, MAN TopUsed has the ability to offer an operating rental facility on certain model types to support customers during peak demand periods – a service which is growing in demand.

Clearly, the question of whether to buy a new or used vehicle in the current climate is dependent on a number of variables. What is evident, however, is the need for transporters to exercise extreme caution when buying a used vehicle, lest they fall prey to unscrupulous trading practices.

Buying a used vehicle comes with an element of risk. To minimise this, it is important to purchase through a reputable source.