Vehicle asset finance market rebounds as credit terms become more consumer-friendly

The vehicle asset finance (VAF) sector is experiencing a notable resurgence following a challenging couple of years characterised by high inflation and a series of interest rate hikes.

As of the third quarter of 2025, fresh data reflects a shift in consumer trends and borrowing behaviours, driven by more accommodating credit terms and an influx of affordable vehicle options.

Reflecting on the developments in VAF, the third quarter reported a remarkable 12% year-on-year increase in new business volumes, alongside an impressive 6.6% rise in outstanding balances.

This growth aligns with a broader upward trend in overall credit across various loan categories, which recorded a 7% rise year-on-year.

Particularly noteworthy is the resurgence in personal loans, which witnessed an 8% growth in account volume.

This collective progress marks a decisive turn from previous years, when market contractions saw around 140,000 middle-class consumers exiting the VAF arena.

The downturn in 2023 and 2024 was primarily attributed to a perfect storm of economic pressures: stagnant wages, record-high inflation, escalating fuel costs, and an increasing reliance on alternative transport options such as ridesharing services.

The combined impact led to declining car sales and VAF volumes. However, by late 2024, changes in the interest rate environment set the stage for a recovery, catalysed further by the introduction of affordable Chinese automotive brands into the market.

As of October 2025, sales figures surged, with the National Association of Automobile Manufacturers of South Africa (NAAMSA) reporting an astonishing 55,956 new vehicles sold—the highest monthly total in over a decade.

The introduction of Chinese brands into the industry has been a game-changer. Although no single brand has dominated the market, collectively, they have captured an increasing market share, skyrocketing from less than 3% in 2020 to around 13% today.

Their presence has been pivotal in shifting consumer behaviour, as these brands typically enter the market at more accessible price points, something that consumers have been actively searching for amid persistent cost-of-living pressures.

Moreover, a promising trend has emerged in the credit market, with a significant shift in VAF loan terms over the last year.

The proportion of loans with terms extending to 90 months or more has doubled from 7% at the start of 2024 to 16% by September 2025.

This alteration is crucial as longer-term loans lower monthly repayments, enhancing affordability for consumers who are still grappling with economic pressures.

This shift has drawn specific consumer segments back into the VAF landscape, predominantly the Middle-Class Workers and Heavy Hitters, who together account for nearly 88% of VAF by value.

According to Ans Gerber, Head of Data Products, "The change in the issuance of VAF loans is remarkable. These favourable conditions, marked by declining interest rates, more manageable petrol costs, extended repayment terms, and more reasonably priced vehicles, particularly imports from China, have come together to stimulate the market."

With 12 consecutive months of growth and a record monthly sales rate for both new and used vehicles, the VAF market appears poised for a sustained recovery.

Observers are keenly watching how these developments will further shape consumer behaviour in the coming months, hoping that the positive momentum continues through 2026 and beyond.

BUSINESS REPORT