South Africa, known for its challenging terrains, has a long-standing love affair with SUVs. However, for those eyeing the latest models from Audi, BMW, and Mercedes-Benz, being among the top 4% of income earners is a prerequisite. The latest TransUnion Vehicle Pricing Index (VPI) paints a concerning picture of the luxury car market, where prices have surged far beyond inflation in the second quarter of 2023.
TransUnion Vehicle Pricing Index Reveals Soaring Prices
The TransUnion Vehicle Pricing Index (VPI) is a trusted indicator in South Africa’s automotive sector, measuring the relationship between the increase in vehicle pricing for new and used vehicles across 15 top-volume manufacturers. Its latest findings reveal that the prices of new vehicles, on average, skyrocketed by 6.7% in the second quarter of 2023. This rate exceeded the country’s inflation rate, which stood at 5.4% in June 2023, by a substantial 1.3%.
Experts have expressed concern as price increases in various segments of the market have surpassed the Consumer Price Index (CPI). The report also ominously forecasts further price hikes in the coming months.
The Rising Cost of Luxury SUVs
In the SUV category, the surge in prices is most apparent, with the overall price of all body types increasing during this period. Among them, SUVs and hatchbacks experienced the most substantial increases at 7.4% in Q2 2023. The breakdown of year-on-year price increases in various categories is as follows:
Small SUVs: 6.8%
Premium and Hybrids: 6.6%
Crossovers: 6.4%
Electric SUVs: 3.1%
Luxury Brands in the Spotlight
Audi, BMW, and Mercedes-Benz have a strong presence in the luxury car market in South Africa. For many aspiring car owners, these brands epitomize status and quality. However, the price tags for even the most affordable models from these manufacturers are eye-watering.
The most affordable luxury SUV in this category is the BMW X3, starting at R981,224.
The Audi Q5 is slightly pricier, with a starting price of R1,012,000.
At the top of the list, the Mercedes-Benz GLC commands a starting price of R1,156,053.
These prices are for the base models, and as any car enthusiast knows, additional features and customizations can quickly push these figures even higher.
Can You Afford These Luxury SUVs?
If you’re considering financing one of these luxury SUVs, you need to be aware of the financial commitment involved. To give you a better perspective, here are the estimated monthly installment amounts for the base models, assuming a 60-month (five-year) payment term and an 11.75% lending rate with a 0% deposit:
BMW X3
Starting Price: R981,224
Monthly Instalment: R21,799
Estimated Monthly Salary Required: R87,192
Audi Q5
Starting Price: R1,012,000
Monthly Instalment: R15,381
Estimated Monthly Salary Required: R61,524
Mercedes-Benz GLC
Starting Price: R1,156,053
Monthly Instalment: R17,714
Estimated Monthly Salary Required: R70,856
A Luxury Beyond Most South Africans’ Reach
These figures highlight the stark reality that luxury SUVs from Audi, BMW, and Mercedes-Benz are far from affordable for the average South African. To put it in perspective, experts recommend that car owners should not allocate more than 25% of their monthly income to vehicle financing. This means that to afford the cheapest SUV on this list, you’d need to earn no less than R87,000 per month.
According to the World Inequality Database, this places you in the top 4% of income earners in South Africa, making luxury SUV ownership a privilege for a select few.
In a country characterized by economic disparities, these statistics underscore the ever-widening gap between the wealthy elite and the majority of the population. While luxury SUVs may be a symbol of prestige and comfort, they are increasingly becoming an unattainable dream for the vast majority of South Africans.
As prices continue to rise, it remains to be seen how this trend will impact the automotive industry and the aspirations of those who long for the status and comfort that these luxury vehicles offer.
