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IOL News
9 hours ago
- Business
- IOL News
South Africa's growing consumer debt: Economists warn of dangerous borrowing trends
Economists have warned that rising consumer borrowing for essentials like groceries and fuel poses serious risks to household stability. Image: Ayanda Ndamane / Independent Newspapers Economists have warned that South Africans are falling into unsustainable debt by using credit to purchase basic necessities such as groceries, fuel, and electricity. They say this shift is financially dangerous and structurally damaging to household stability. This follows a warning from the National Financial Ombud Scheme South Africa (NFO), which flagged a sharp rise in consumer credit defaults. TransUnion's Q1 2025 Industry Insights Report shows that 41.3% of non-bank personal loan accounts are now more than three months in arrears, the highest serious delinquency rate recorded in over three years. Retail instalment account defaults stand at 27.1%, clothing accounts at 25.9%, and revolving credit at 14.9%. According to the report, uptake of these products is also increasing, with retail instalment credit up 16%, clothing credit up 7.6%, and revolving credit up 5.4%. The NFO says this simultaneous rise in borrowing and missed payments reflects mounting financial strain on households. 'These figures are not just statistics. They reflect the reality of households using credit to survive rather than to grow,' said Kwanda Vabaza, Manager of Adjudication at the NFO's Banking and Credit Division. 'When nearly half of all non-bank loan holders are behind on their payments, the system is under significant strain.' Independent economist Professor Bonke Dumisa cautioned that consumers should avoid credit for daily expenses. 'Ordinary consumers must avoid purchasing groceries or other regular household goods on credit,' he said. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading He added that consumers should try to avoid having their credit liabilities above 25% of their total disposable income. Professor Waldo Krugell, an economist at North-West University, noted that while the full scale of the problem is difficult to determine from credit bureau data alone, the pressure on consumers is evident. 'Though consumers have been spending on food, restaurants, clothing, and footwear, there is also something of a cost-of-living crisis. The inflation rate has come down, but price levels are high and salaries have been slow to catch up. In the end, many people spend on credit, essentially living above their means.' Krugell added that the situation is likely to affect broader economic performance. 'At some stage, households will have to apply some unpleasant austerity, and consumer spending as a driver of the economy will take a knock.' While financial institutions remain stable, Krugell said profitability and share prices could decline if consumer defaults rise. He also flagged low levels of financial literacy as a key concern. 'Current regulations and checks are quite good, but there is a big deficit in consumer financial literacy. Most of us know too little about managing our finances well.' The NFO has also raised concerns about reckless lending and urged consumers to lodge complaints with it if they were granted unaffordable loans. THE MERCURY
Yahoo
6 days ago
- Automotive
- Yahoo
Get Ready To Thank Tariffs For Making Cheap Cars More Expensive
Brace yourself for an alarming statistic. A whopping 92 percent of new vehicles sold in the U.S. priced under $30,000 are imports. The eight percent that aren't do not exactly constitute a rounding error, but you would not be unfairly criticized if you argued that basically all America's cheap cars come from someplace else. The stat comes from and the site's Industry Insights Report for the first half of 2025, which concludes that the Trump administration's tariffs are "disproportionately affecting" the cheap car market. For the record, the only American-made cars that cost less than 30 grand are not domestic models: we're talking about the stalwart Honda Civic and Toyota Corolla. OK, technically speaking these are "American" cars because they're made in U.S. factories, but the ugly truth is that cheap vehicles from Ford and GM are imports from Mexico, China, and South Korea. According to the study, the supply of these inexpensive rides is going to dry up, triggering price increases as tariffs kick in through the second half of the year. You might ask yourself why the U.S. market relies so heavily on imports to stock the under-$30,000 segment. The answer is high labor costs in America, but that isn't the whole story. Cheap cars aren't very profitable, if they're profitable at all. GM, Ford, and Stellantis (owner of the Jeep, Chrysler, Dodge, and RAM brands) would rather sell you a more expensive pickup truck or large SUV than a compact sedan and are happy to make those vehicles in U.S. plants. Read more: These Are Your Favorite Factory Exhaust Designs Why Are All The Cheap Cars Imported? For decades, the manufacturing of small, cheap vehicles has effectively been outsourced to other countries. This has enabled American companies to remain in the segment. Tariffs are upsetting this arrangement. For auto executives, the way forward is mostly bad. Years ago, I covered a briefing at the Detroit Auto Show by then-FCA CEO Sergio Marchionne, and he was completely unflinching in his assessment of the affordable small-car market in the U.S. It was for the foreign carmakers to dominate, as in his view they had figured out how to make an acceptable margin. When interest rates were low, this arrangement actually wasn't a major issue – buyers simply financed their way into more expensive vehicles, and for years the average transaction price on new cars and trucks has been trending up (although lately its been in moderate retreat). But interest rates aren't low anymore. And with tariffs, cheap cars are about to get more expensive. There was a run on new-car sales in early 2025 when tariffs were announced, as consumers sought to snap up vehicles before the import taxes hit and the automakers rolled out incentives to move the metal off dealer lots. That phase now appears to be ending, and the U.S. market is preparing to accept a new normal. The question is whether more domestic manufacturing will come online or whether carmakers will reduce production as prices invariably rise and demand flags. Could The U.S. Market Remake Itself? I don't see a scenario in which cheap vehicles suddenly aren't imported in droves. So if tariffs aren't dialed back, the entry-level tier is set up for a world of hurt. It's depressing to consider this outcome after decades of Americans enjoying the world's most competitive market and having access to all manner of choice when it comes time to purchase a new set of wheels. Supporters of Trump's tariffs will insist that the policy will force automakers to increase U.S. production, build factories here, and ultimately hire more U.S. workers. But students of Trump's actual motives understand that what he and his trade advisors might actually want is to compel exporters to eat the tariffs, effectively paying a substantial toll for access to the U.S. market. That idea relies on prices somehow not going up, and of course Trump has jawboned the car companies to shield consumers from the well-understood economics of tariffs. They might play along. But that would mean they'll lose even more money on inexpensive cars than they are already. The logical response would be to reduce supply. In the near term, we're likely to see fewer sub-$30,000 cars available as tariffs make life far more unpleasant for the segment. Want more like this? Join the Jalopnik newsletter to get the latest auto news sent straight to your inbox... Read the original article on Jalopnik.
Miami Herald
22-07-2025
- Automotive
- Miami Herald
Tariffs Are Making New Cars Even More Unaffordable, Says Study
New cars are expensive, but the latest data indicates that they aren't slowing down any time soon. According to data from Cox Automotive and Kelley Blue Book, the average transaction price for a new car reached $48,907 in June 2025, a 1.2% increase from the same period last year. Though it seems like a high amount, a quick glance at car-buying platforms and automakers' websites shows that there are many models on the market with MSRPs far below that threshold. However, a new study from the research department at Cars Commerce, the company behind shows that a few key factors will keep cars unaffordable. According to new data from Cars Commerce's Industry Insights Report for the first half of 2025, the impact of the Trump administration's tariffs on imported cars, as well as the threat arising from the end of Federal EV Tax Credits, would fuel an affordability crisis that can greatly impact the U.S. car industry. "With price hikes on many imports starting to emerge, the $7,500 federal EV tax credit set to expire in September, and the entry-priced segment now shrinking for three consecutive months, affordability remains the biggest challenge to continued growth," said David Greene, industry analyst at Cars Commerce. "How automakers respond in the second half - through pricing, production, and incentives - will shape the road ahead." Most notably, Cars Commerce found that the inventory of cars priced under $30,000 saw a massive dip. Per their data, cars under $30K made up just 13.6% of new car inventory in the first half of 2025. That number is a considerable loss compared to 2019, when such vehicles made up 38% of the market. In terms of dealer inventory, the segment saw 3.9% growth year over year (YoY); however, it lags behind the 5.6% overall increase for new-car inventory. The segment is the most exposed to tariffs, as about 92% of the cars sold under $30K are actually imported from overseas. Just two cars in that segment, the Honda Civic and Toyota Corolla, are built in the US, though some models are produced in Japan. At the same time, the segment that defined as the "mid-range new car segment;" which consists of cars costing between $30,000 and $49,000, accounted for nearly half of all inventory, though 50% of the vehicles in this price bracket are imported. The data suggests that automakers are adjusting to tariffs, as the share of imported cars within the $70,000-plus price segment increased from 40% in May to 41% in June. The study also shows that dealers increased their inventory by 5.6% during the first half of 2025, as they stocked up before tariffs were imposed in April. Additionally, there was a surge in sales as consumers rushed to secure pre-tariff pricing in March and April, leading to a 3.9% increase in new car sales compared to the first half of 2024. The increase in new vehicle purchases raised the supply of used cars, as many customers traded in their vehicles before the tariffs took effect. Consequently, used car prices dipped slightly in the first quarter of 2025 but rebounded with a 1.6% increase in the second quarter. According to data from more than half of consumers said that the tariffs have influenced their decision to buy American-made cars. Additionally, over 73% of respondents would consider purchasing U.S.-built cars to avoid extra costs. Currently, the supply of pre-tariff new cars is depleting, and as a result, the study predicts that we should expect price increases in the near future. So far this year, the average price of new cars has risen by only $97; however, vehicles from the United Kingdom have become over $10,000 more expensive. In contrast, EU-built cars have seen an average increase of nearly $2,500. Meanwhile, the prices of vehicles from China, Canada, and Korea, as well as American-built cars, have decreased by an average of $200. In addition, Cars Commerce also found that EV buyers will be affected in the latter half of the year, as the federal $7,500 tax credit for new EVs is set to expire after September. In its survey of electric vehicle (EV) buyers, 53% said that the federal tax credits were a primary reason for their purchases, adding that it may be "difficult" to maintain the momentum of 28 consecutive months of new EV inventory growth once the calendar hits October. The Trump administration and some lawmakers say they're trying to make cars more affordable by imposing tariffs, but according to the consulting firm AlixPartners, these tariffs could cost the auto industry about $30 billion by 2026. Although manufacturers like Nissan and Volvo are taking localization concerns seriously with their recent plans to consolidate factories, trim the U.S. lineup, and move production of their top-selling vehicles to factories in the U.S., it should be reiterated that this isn't a simple flip of the switch; Volvo, for instance expects to make the first XC60s in South Carolina by 2026. Until then, those on the buyers' side have all the tools to find out which specific vehicles are "American-made," including the NHTSA's Part 583 American Automobile Labeling Act Reports, which are publicly available on their website. Copyright 2025 The Arena Group, Inc. All Rights Reserved.
The Citizen
28-06-2025
- Business
- The Citizen
Are you a young professional? Here's how to avoid the debt trap
Beware! With fulltime employment, creditors are eager to help you accumulate debt. As a young professional it is easy to get caught up in all the 'must-haves' such as shiny wheels, a branded briefcase or expensive shoes. All bought on credit of course! However, once you have bought all the trappings a young professional needs, you can end up with a mountain of debt that you probably will not be able to afford to pay off. Christiaan Coetzee, CEO of FinFix, says starting your professional journey is exciting with a steady income, financial independence and the ability to finally say yes to things you have been putting off until you start working fulltime. 'But with this newfound freedom comes responsibility, especially when it comes to credit. South African youth are increasingly vulnerable to debt traps, often lured by the promise of 'buy now, pay later' without fully understanding the consequences,' he warns. ALSO READ: Will South African youth achieve financial freedom? — Tomorrow's leaders drowning in debt today Uptick in debt among young professionals Recent data indicates a significant uptick in credit usage among young South Africans. According to TransUnion's Industry Insights Report for the second quarter of 2024, the number of credit-active consumers grew by 4.7% year-over-year to 18.5 million, with Millennials and Gen Z accounting for 62% of new credit originations during the quarter. Notably, Gen Z's share of new credit card accounts increased by 22.7% year-over-year. Coetzee points out that while access to credit can be a powerful tool for building a financial future, it also poses risks if not managed carefully. The same report highlights that 33% of consumers intend to apply for a new personal loan in the next 12 months, indicating a growing reliance on credit to manage day-to-day expenses. Therefore, Coetzee says, understanding how to navigate this credit landscape is crucial to avoid falling into debt traps that can be obstacles to your financial goals. ALSO READ: 'Under pressure': South Africans struggling to keep up with debt repayments Coetzee has these five practical strategies for young people to stay out of the debt trap to keep in mind: 1: Understand the full cost of credit and debt 'Remember credit is not free money. Whether it is a credit card, clothing account, or personal loan, each comes with interest rates, initiation fees and service charges that can accumulate quickly.' For instance, a personal loan from a non-bank lender carries a delinquency rate of 40.6%, indicating higher risk and potential cost. Delinquency means if you do not pay. Before committing to any credit agreement, request a detailed breakdown of the total repayment amount and compare it to the cash price to understand the true cost and see if you can afford it. 2: Live within your means It is tempting to upgrade your lifestyle with your first pay and buy new gadgets, trendy clothes, a fancy car or go on more outings. However, Coetzee warns that succumbing to lifestyle inflation can lead to overreliance on credit. The TransUnion Consumer Pulse Study found that 52% of consumers have cut back on discretionary spending, indicating a need to prioritise essential expenses. Coetzee says it is a good idea to consider implementing the 50/30/20 rule, where you allocate 50% of your income to needs, 30% to wants and 20% to savings and debt repayments. ALSO READ: Leaving the nest? Here are 5 harsh financial truths to remember 3: Build and stick to a budget to avoid too much debt Budgeting empowers you to take control of your finances by providing a clear picture of your income and expenses. With the rising cost of living, many South Africans are turning to credit to manage expenses, but Coetzee says it is better to use budgeting tools or apps to track your spending and identify areas where you can cut back, to ensure you live within your means. 4: Keep an eye on your credit score Your credit score affects your ability to secure loans, rent an apartment and can even affect your employment opportunities. You are entitled to one free credit report every year, allowing you to monitor your financial health. Make sure that you regularly check your credit report to identify errors or signs of identity theft and take steps to improve your score by paying bills on time and reducing outstanding debts. ALSO READ: Debt Review: The good, the bad and the ugly 5: Get help with your debt before it is too late If you still find that you are struggling with debt, remember you are not alone. The National Credit Regulator reports that 18.1 million people applied for credit in the third quarter of 2024, a 3% increase from the previous quarter. Coetzee says you can reach out to organisations like FinFix for financial education workshops, one-on-one credit coaching and practical tools to help you manage and overcome debt. Empowering your financial future Credit, when used responsibly, can be a valuable asset in building your financial future. However, Coetzee says, mismanagement can lead to long-term debt and financial stress. 'By understanding the true cost of credit and monitoring your credit score, you can avoid the debt trap and achieve financial stability. Consider speaking to a registered financial adviser who can help you structure a plan tailored to your income, goals and debt profile.'
