Comprehensive insurance rates have ballooned by 150 per cent over the past four years, while the fuel price has doubled – those are factors that have been major contributors to the mobility cost rising by 44 per cent between 2004 and this year, according to the sales and marketing director of Wesbank, Chris de Kock.

He was addressing the media at the announcement of the bank’s second quarterly Vehicle Sales Confidence Indicator measures. De Kock said increasing parts prices; together with a higher accident rate and insurance fraud were major components responsible for the massive rise in insurance rates. He said that fraud became more prevalent periods of economic downturn as was being experienced currently, which put more pressure on household income.

Wesbank’s total monthly mobility cost is a combination of interest, capital repayment, insurance, fuel and maintenance costs, based on a car that cost R100 000 in 2004 and was financed over 54 months. At that time the mobility cost was R3 741,62. That amount has now risen to R5 374,52 a month, with the insurance portion rising from 12 per cent to 21 per cent and the percentage related to the cost of fuel jumping from 18 per cent to 25 per cent. This saw the contribution to capital repayment falling from 45 to 33 per cent, while the interest portion was fairly stable (13 per cent down to 12 per cent). Maintenance was not a big factor these days as most new cars are covered by service or maintenance plans.

The prediction for April 2009 is a further jump of 9 per cent in the mobility cost, due to rising new car prices and further increases of about 24 per cent in the cost of insurance and fuel in the next 12 months.

The Wesbank Vehicle Sales Confidence Indicator fell from 5,4 to 5,1 between January and April 2008. Predictably the majority of the respondents  - 500 vehicle sales staff, finance and insurance people, dealer principals, general managers and sales managers, together with franchise directors – cited increasing insurance rates, climbing fuel prices and stuttering economic conditions as major factors for the slowdown.

The respondents’ medium term view is that there will not be a turnaround soon, but future confidence climbs to 6.1 by this time next year. Chris de Kock says Wesbank believes the market is close to bottoming out, although the interest rate policy may only soften in 2009 and it sees sales improving from mid 2009.

The repossession of vehicles was rising as the country entered an all-time high in regard to the debt to income ratio. De Kock said that Wesbank with over a million customers, was currently repossessing vehicles at the rate of 1 000 a month, but fortunately this rate appeared to be stabilising.

De Kock discounted the recent participation of First National Bank in vehicle and asset finance on Wesbank’s financial performance as Wesbank was responsible for all the “back end” of deals secured by FNB’s hundreds of branches. 

FUEL RETAIL MARGIN UNDER SCOPE

The minerals and energy department has commissioned research on the fuel retail margin, which has retailers say amounts to only 6 per cent of the retail price.

The study is the result of a meeting with the retailers concerning the present margin of 64,7c/litre (as of  July 2, 2008). This followed an increase of 5c/litre recently, when the retailers had hoped for 11,94c/litre due to their increasing fixed costs. The study is expected to be completed before the end of the year.

Fuel Retailers Association CEO, Peter Morgan, said the high price of fuel had resulted in a drop in sales, with fewer motorists saying, “fill ‘er up” when they pulled into the pumps.

Meanwhile motorists and retailers have had to endure their seventh fuel price increase of the year, with 93 octane unleaded petrol now costing R10,62 a litre in Gauteng  and 95 octane unleaded up to R10,53 a litre at the coast, with standard diesel costing R11,49 a litre inland. The latest round of price increases takes the annual inflation in the price of diesel fuel to 80 per cent and petrol to 50 per cent.

The petrol price has rocketed at nearly twice the rate of inflation since 2001, when a litre of petrol cost R3,62. If it had increased at the inflation rate a litre would only have cost R5,58 a litre instead of the current R10,62.

The price of one litre of 95 octane petrol inland is now made up of the following components, with the percentage of the retail price in parentheses:

• Wholesale margin: 44,887c (4,2 per cent)
• Service cost recoveries: 9,5c (0,9 per cent)
• Dealer margin: 64,7c (6 per cent)
• Zone differential in Gauteng: 13,9c (0,3 per cent)
• Fuel levy: 27c (11,9 per cent)
• Customs and excise duty: 4c (0,4 per cent)
• Road Accident Fund: 46.5c (4,3 per cent)
• Petroleum products levy: 0,15c (0.0 per cent)
• State levy: 24,85c (2,3 per cent)
• Demand side management levy: 10c (0,9 per cent)
• Incremental inland transport recovery levy” 0,5c (0,1per cent)
• Contributions to the basic fuel price: 723,013c (67,6 per cent)
• Total price (one litre of 95 octane fuel inland): 1 070c (100 per cent)