An Empirical Analysis Of The Interest Rate-Vehicle Purchase Decision Nexus In South Africa

Chisasa, Joseph; Dlamini, Winnie
May 2013
International Business & Economics Research Journal;May2013, Vol. 12 Issue 5, p477
Academic Journal
The domestic passenger car market has witnessed substantial growth in South Africa. At the same time, bank repossessions and black-listing of defaulting borrowers have increased in sympathy. This paper empirically examines the link between interest rates and the borrowers' decision to purchase a passenger vehicle in South Africa. We use monthly time series data of passenger vehicles purchased, household income, fuel prices, prime interest rates and producer price index for manufacturers from January 1995 to December 2011. With passenger vehicle unit purchases as the dependent variable, we obtain OLS estimates of the passenger vehicle purchase function. Results show that there is a negative, but insignificant, relationship between interest rates and passenger vehicle purchases in South Africa. Holding other factors constant, a 1% increase in interest rate results in a 0.9% decrease in passenger vehicle purchases. Household income, fuel price and producer price index are observed to have a positive and insignificant impact on the decision to purchase a passenger vehicle. Our results have policy and decision making implications to lenders and borrowers, respectively.


Related Articles

  • Bad news all round for vehicle sales. GAMA, MOXIMA // Finweek;8/13/2015, p32 

    The article offers information about a July 2015 report on vehicle sales statistics released by the National Association of Automobile Manufacturers of South Africa.

  • Introductory Prices of 1966 Automobile Models. Stotz, Margaret S. // Monthly Labor Review;Feb66, Vol. 89 Issue 2, p178 

    Details the measurement of the introductory prices of 1966 automobile models in the U.S. 1966 models of automobiles selected for pricing for the Consumer Price Index and Wholesale Price Index; Effect of quality changes on the price of automobiles.

  • South Africa's Motor trade sales increased by 5,9 percent year-on-year in March 2015.  // African Business News;5/21/2015, p1 

    No abstract available.

  • South Africa's June 2013 new vehicle sales up.  // African Business News;7/ 1/2013, p25 

    The article reports on the growth of the vehicle sales in South Africa for a second month in June 2013, marking the continued ease of the consumer spending in the second quarter. According to the National Association of Automobile Manufacturers of South Africa, sales increase 3.3 percent in 2012...

  • Car shopping made easier.  // Charlotte Post;12/26/2013, Vol. 39 Issue 16, p1B 

    The article offers tips for car purchasing and suggests getting information on the car on which money will be spend which helps in negotiating the best price and advices to cap the payment of car less than 20 percent of the monthly salary.

  • New car sales in Jan-Feb up in Bulgaria.  // Regional Today;3/19/2014, p4 

    The article presents the report by the European Automobile Manufacturers' Association (ACEA) as of mid-March 2014, which showed that new car sales in Bulgaria increased by 26.5% to 2,883 units in January-February 2014 from January-February 2013.

  • Untitled. Disdale, James // Auto Express;8/8/2012, Issue 1229, p57 

    The article reports that family car buyers should start again checking the features of compact estate vehicles whose sales start to decline due to the growing preference of buyers for practical and affordable automobile.

  • GOING FOR A SONG.  // Land Rover Monthly;Nov2013, p30 

    A personal narrative is presented which explores the author's experience of buying two Land Rover cars.

  • SUPPLY AND DEMAND. PHILLIPS, DAVE // Land Rover Monthly;Nov2013, p140 

    A personal narrative is presented which explores the author's experience of selecting new Land Rover car.


Other Topics