84% of used cars listed for sale in SA have a “fair” or “great” price
While the used car market has experienced unprecedented levels of price inflation, dealers appear to be right on the button when it comes to pricing – as *84% of used cars listed for sale on AutoTrader have a “fair”or “great” price, reports motoring marketplace AutoTrader. Less than 10% of the cars listed for sale in February 2023 had a “high” price while 6% had an abnormally “low” price.
These insights can be extrapolated from the new price ratings feature recently released by AutoTrader on their car buying and selling platform. It utilises a machine learning algorithm and live market data to determine the pricing of the car in relation to the market. “Low” means that the car is priced much lower than the market. “Fair” means it is priced in line with the market. “Great” means it is priced below the market. “High”, on the other hand, means it’s priced higher than the market. There’s also a “no rating” that applies to cars that do not have sufficient pricing data, such as rare cars or even newly released models, those that have over 500 000 km on the clock or are more than 10 years old.
The “fair” to “great” price ratings can be found on many of South Africa’s top-selling models. The VW Polo, which is often South Africa’s top selling hatchback and the second most enquired model on the used car market in 2022, is an example of this trend. The most listed variant for this model range was the Volkswagen Polo Hatch 1.0TSI 70kW Life (February 2023). Four percent of this specific variant were priced “low” (ranging from R 225 000 to R 339 949, depending on the mileage and year model). Ninety percent of these variants were priced “great” or “fair”. “Great” cars were priced between R299 900 and R 379 950, while “fair” cars were priced between R313 900 and R 422 950 (depending on mileage and year model).
“Price ratings help shoppers easily evaluate the cost of a specific variant in comparison to similar ones that are in the market at the same time. Practically, this means it is much easier to evaluate the listed price of a car,” explains AutoTrader CEO George Mienie.
Five percent of the Volkswagen Polo Hatch 1.0TSI 70kW Life derivatives had a “high” price. Those were cars listed for sale priced between R389 900 and R489 500 depending on the mileage and year model. With the price of a brand new base VW Polo Hatch 1.0TSI 70kW Life starting at R334 400, this begs the question as to just how much optional extras can push up the value?
Variants that fall under the ‘high’ price rating often have some additional features or optional extras such as larger wheels/rims, driver aid technology, sunroof/panoramic roofs, reverse cameras etc. This means that a ‘high’ price doesn’t necessarily mean that the car is overpriced but rather an indication to pay closer attention to the car features listed.
It's precisely these intricacies that have traditionally made selling and buying a used car the preserve of experienced car salesmen and women. Successful used car sales professionals – with decades of experience evaluating a car in relation to the market are able to price closer to the market value because they have enough knowledge and experience to evaluate the trading conditions against the unique characteristics of the car for sale. “This ability to ‘trust your gut’ that an experienced car salesperson has, doesn’t help the new generation of motor professionals price more accurately, nor does it help the many consumers who are looking to better understand value,” Mienie points out.
During times of market fluctuations, consumers can be understandably more cautious and dubious when evaluating the listed price of cars put up for sale. Last year, for example, demand for used cars drove up prices. The average list price of used cars for sale increased by 10%, rising from R386,682 in 2021 to R427,290 in 2022¹.
Traditionally, cars have been priced according to historical data, collected over a period of time, and used to evaluate cars. “The digital age has given rise to a better-informed consumer, one who understands the real-time fluctuations of market trading conditions, and wants increased transparency, so that they can either buy or sell their car for the best possible price at any given time,” points out Mienie
The “fair” and “great” price ratings are not only reserved for the most sold and more affordable models, such as the VW Polo example. The new price ratings tool reveals that luxury brands are also being priced in line with the market. The BMW X3 xDrive20d M Sport constituted 47% of all X3s listed for sale in February 2023 and 89% of those were priced “fair” (between R239 900 and R1 129 900) or “great” (between R309 900 and R840 000). “High” priced X3 xDrive20d M Sport variants were listed between R379 950 and R1 199 995 and typically had features such as double-spoke style 699 M, 20", M Sports Suspension, and a fully electrically operated Panorama glass sliding/tilting sunroof while “low” priced variants listed between R429 900 and R709 500.
The second most listed X3 variant for sale in February 2023 was the xDrive20d, making up 19% of the listings. In this instance, 74% had a “fair” price (R765,735, on average) or a “great” price (R698,176 on average). A further 20% had a “high” price (R850,177 on average). The remainder of the listings were considered to have a “‘low” price at an average of R606,500.
How will pricing change in 2023? According to Mienie, “Increased demand for new cars is predicted to put downward pressure on used car prices. If that materialises, it will be more important than ever before for consumers to be able to accurately evaluate the price of a used car in comparison to others trading in the market at that time – thereby avoiding that they pay too much.”
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*Data does not include cars with ‘no ratings’
The AutoTrader Price Ratings tool is a first of its kind in South Africa. It rates used car prices based on a unique machine learning algorithm, which utilises live market data to identify how a car is priced in comparison to other similar cars in the market.
This innovation is significant because it brings transparency to a transaction that has traditionally relied on historical trading data. Only the sellers previously had access to this information (via trade-in books).
Price Ratings incorporates the most important variables, such as make, model, variant, specification and trim. The system helps dealers price cars more accurately, and it also gives consumers the ability to evaluate pricing better.
Price Ratings is not new to dealers; it was launched to them in January 2022. However, it is new to consumers (it was launched to the public in April 2023).
It labels used cars listed for sale with one of four Price Ratings: low, great, fair or high. “Low” means that it is priced much lower than the market average, “great” means it is priced below the market average, “fair” means it is priced in line with the market average and “high” means it’s priced higher than the market average. There’s also a “no rating” that applies to cars that are new, contain excessively high mileage or are very old. At time of launch to the consumer, 80% of vehicles listed for sale were rated either “great” or “fair”.
While Price Ratings offers tangible benefits to customers, it is of value to dealers too – because it delivers complete pricing transparency. AutoTrader is constantly trying to promote consumer transparency because, much like Price Ratings, it makes good business sense. With transparency, trust is built, the consumer feels much more empowered and comfortable – and the dealership is far more likely to close the deal.