Interest Rate Increase Adds to Mounting Cost Pressures on Consumers
The National Automobile Dealers’ Association (NADA) says the South African Reserve Bank’s decision to increase interest rates adds another burden to household budgets already strained by sharply higher fuel and living costs.
The Monetary Policy Committee today increased the policy rate by 25 basis points to 7.25%, with the prime lending rate consequently moving to 10.75%.
The increase comes as consumers continue to contend with elevated living and mobility costs. Headline consumer inflation edged up to 4.4% in August from 4.3% in July, adding to an affordability environment already shaped by sharply higher fuel and household costs.
“While we understand the inflationary pressures behind the decision, another increase in borrowing costs is difficult news for consumers, particularly when affordability is already influencing vehicle purchasing decisions,” says Brandon Cohen, Chairperson of NADA.
The Competition Commission’s latest Cost of Living Report underlines the strain on households. Petrol prices increased by 26% between January and July 2026, while electricity and water costs have also risen well ahead of inflation.
"Consumers are not dealing with higher interest rates in isolation. Vehicle finance, fuel, insurance, vehicle licensing fees, electricity, food and other essentials all compete for the same disposable income. It is the cumulative impact that ultimately determines what households can afford,” Cohen says.
The pressure is already influencing vehicle purchasing behaviour. Recent TransUnion research shows that vehicle purchase intent declined from 22% to 19% between the first and second quarters of 2026 as affordability concerns intensified.
Yet South Africans continue to prioritise mobility. New-vehicle sales reached 57,898 units in August, up 11.4% year on year, demonstrating that underlying demand remains resilient.
“That contrast is important. Consumers still need vehicles, but they are becoming much more deliberate about what they buy and how they finance it. We expect an even greater focus on value for money, fuel efficiency, quality pre-owned vehicles and the total cost of ownership.”
Cohen says the full effect of the latest rate increase on vehicle purchasing behaviour is likely to become clearer over the next 60 to 90 days, as consumers reassess household budgets and finance commitments.
“Dealers are seeing these shifts first-hand and are well placed to help customers find vehicles and finance structures that meet their mobility needs while remaining sustainable within household budgets,” concludes Cohen.
NADA is a proud association of the Retail Motor Industry Organisation (RMI).
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