With Debt Going Out of Style, Used-Car Auctions Boom in South Africa
Sunday, December 21, 2008
JOHANNESBURG -- It's the holiday season, and here that means quiet. Residents flee this sun-scorched metropolis for the coasts, shops close, and chaotic roads grow calm.
But at a warehouse off a suburban freeway on a recent Saturday morning, things were anything but calm. Cars were double-parked outside. People streamed toward the entrance with haste.
Inside the building as large as a hangar were more cars -- shiny vehicles adorned with price tags and balloons that read "Merry Christmas." Families wandered, peering through windshields.
It was 10:10 a.m., 20 minutes before the start of the last used-car auction of the year at Burchmore's, a wholesale dealer. More than 200 cars -- among them BMWs, Nissans, Audis and Opels -- were up for grabs. All were bank repossessions, and all would be sold "voetstoots," Afrikaans for "as is."
Thabiso Mokle, a marketing student with short, spiky braids, bent under the open hood of a sea-blue 2005 Ford Fiesta to inspect its innards. He sat in the front seat to page through the car's manual. A Fiesta was his first choice. But not a new one.
"I don't want to be in debt," said Mokle, 21.
It was a decision echoed throughout the steamy room, which bustled with hundreds of people. In South Africa, a car-loving nation, an economic crisis is looming amid the global financial meltdown. And with debt going out of style, used-car auctions are booming.
It's the reverse of two years ago, when the nation's economy was flourishing, interest rates were relatively low, the currency was strong, and an emerging black middle class was wielding its spending power. Sales of new cars surged 29 percent that year, making it the best-performing market in the world, according to South Africa's Retail Motor Industry Organization.
Then the price of oil surged. Inflation followed, and interest rates jumped five percentage points. A new law tightened access to credit, protecting banks from the kind of collapse seen in the United States, analysts say.
But for car dealers in South Africa, all this has added up to a bust. New-vehicle sales are down 28 percent from a year ago. Hundreds of dealerships have closed. And as people who bought in the easy-credit days default on loans, banks are repossessing 6,000 cars a month, nearly double the number a year before.
That has been good news for Darryl Jacobson, the slick-talking manager of Burchmore's, which calls itself "the largest vehicle emporium in the land." Two years ago, Jacobson said, about 70 percent of the people who came to the auctions were dealers. Now inventory has doubled, and 60 percent of the crowds are private buyers.
South Africans want bargains, Jacobson said as he walked briskly through the showroom, glasses atop his head. Not dealerships with bells and whistles.