If your vehicle finance application has been turned down, don’t despair. Alternative mobility solutions are rapidly emerging as a practical option for consumers who can’t qualify for traditional vehicle financing. With these solutions, consumers no longer need to rely solely on vehicle ownership tied to financing and creditworthiness. According to Kriben Reddy, founder and CEO of Kredo Mobility, the landscape of vehicle access is evolving, and new methods like long-term rentals, subscription services, and leasing agreements are becoming viable alternatives.
The Rise of Alternative Mobility Solutions
While vehicle financing remains the primary route for most consumers, the concept of alternative mobility is gaining momentum. Currently, about 25,000 vehicles in South Africa are on long-term leases, subscription plans, or rental agreements. Although this is still a small proportion compared to financed vehicle sales, Reddy predicts a rapid expansion in the coming years. He draws parallels to the success of WeBuyCars, a company that started small but has grown into a dominant player in the used-car market. WeBuyCars, which was listed on the Johannesburg Stock Exchange (JSE) in 2021, showcases how quickly a new business model can reshape an industry.
Reddy envisions a similar trajectory for alternative mobility, especially with younger consumers driving the shift. This new generation is less interested in owning vehicles and more focused on access and flexibility. Instead of the long-term commitment of ownership, they prefer services that allow them to use a car when they need it, without the financial burden of taking on debt or managing upkeep.
Why Consumers are Turning to Alternative Mobility
Several factors are contributing to the growing appeal of alternative mobility solutions. One of the main reasons is the increasing difficulty of obtaining vehicle finance. In South Africa, creditworthiness plays a huge role in determining who can secure financing. With only around 23 million credit-active consumers in a population of 65 million, and nearly half of them having adverse credit information such as defaults or judgments, many are finding it hard to qualify for loans.
Additionally, the costs associated with vehicle ownership have skyrocketed due to higher interest rates, inflation, and rising fuel prices. Even consumers who are approved for vehicle finance often find the total cost of ownership—monthly instalments, insurance, maintenance, and fuel—unsustainable in the long run.
Vehicle Finance Application: Decline in Vehicle Sales and Dealer Struggles
The South African vehicle market has also seen a significant downturn. In the years before the 2007 global financial crisis, the market was booming, with new vehicle sales peaking at around 750,000 units annually. Today, new vehicle sales have dropped by more than half. At the same time, the number of new vehicle asset finance (VAF) accounts has declined for five consecutive years, according to TransUnion. In the second quarter of 2024, 7,320 fewer vehicles were financed compared to the same period in 2023.
Dealers are feeling the strain, as fewer financed sales translate into higher operating costs. To stay profitable, dealers have had to increase their margins, which further raises the cost of purchasing a vehicle for consumers. Additionally, dealers face high costs for customer acquisition, often compounded by credit issues, fraud risks, and the need to verify trade-ins.
Digital Solutions Reshaping the Industry
Reddy’s company, Kredo Mobility, aims to address many of these challenges by providing digital tools that streamline the vehicle purchasing process and reduce the risks associated with fraud and credit issues. Kredo Mobility offers solutions to help dealers quickly identify high-quality customers, improve operational efficiency, and access real-time vehicle pricing data. With the goal of making the automotive market more transparent and competitive, these digital innovations could provide much-needed relief for both consumers and dealers.
Kredo Mobility’s technology not only filters out consumers who are unlikely to qualify for finance but also provides dealers with insights to shift these customers toward alternative mobility solutions. As verification costs rise and fraud becomes more sophisticated, dealers need tools that offer a comprehensive view of both vehicles and customers. In the next three to six months, Kredo Mobility expects to add the ability to identify written-off vehicles that have been fraudulently returned to the market, further protecting consumers and dealers.
Looking Ahead: A Growing Market for Alternative Mobility
As affordability challenges persist and fewer consumers qualify for traditional vehicle finance, alternative mobility solutions are set to grow. Long-term rentals, subscriptions, and leases offer flexibility and convenience, especially for those who need access to a vehicle but cannot afford ownership. These options are particularly appealing to younger generations who value experiences and access over long-term commitments.
The shift to alternative mobility is still in its early stages, but the market is evolving. With innovative solutions and increased consumer awareness, the industry may soon see a broader acceptance of these new ways to stay mobile. For consumers who’ve been denied vehicle finance, these alternatives represent a second chance to get back on the road without the need for a hefty loan or long-term financial strain.
Related article: Minimum Salary Requirements to Qualify for Car Finance in South Africa 2024
