South Africa’s vehicle finance market sustained its upward trajectory throughout the fourth quarter of 2025, as detailed in the latest TransUnion credit report. The period marked the fifth consecutive quarter of growth for the sector, a milestone that signals a meaningful and sustained recovery rather than a temporary rebound. The primary force behind this momentum was the country’s younger population, with Gen Z and Millennials collectively accounting for two-thirds of all vehicle finance originations during the quarter.
Key Takeaways
- Younger generations are reshaping credit: Gen Z and Millennials made up two-thirds of all vehicle finance originations in Q4 2025, with Gen Z personal loan volumes surging 39.6% year-on-year.
- Lenders are growing bolder without sacrificing quality: Below-prime originations jumped 20.2% year-on-year, yet delinquencies improved from 7.39% to 6.8%, proving broader credit access and responsible lending can coexist.
- Consumer preferences are shifting: The used-to-new vehicle financing ratio dropped from 1.56 to 0.96, while BNPL adoption hit 57%, signalling a fundamental change in how South Africans purchase and borrow.
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Lenders Take on More Risk as Repayment Behaviour Improves
TransUnion defines its generational age cohorts as follows:
- Gen Z – Born between 1995 and 2010
- Millennials – Born between 1980 and 1994
- Gen X – Born between 1965 and 1979
- Baby Boomers – Born between 1946 and 1964
TransUnion’s Fourth Quarter 2025 South Africa Industry Insights Report revealed that lenders demonstrated a notably increased appetite for risk during the period. As a direct result of this shift in lending posture, originations to riskier below-prime borrowers jumped by 20.2% year-on-year. Importantly, this broader risk appetite did not translate into deteriorating portfolio quality. In fact, it coincided with positive repayment performance across the board, with account delinquencies – defined as the percentage of accounts three or more months in arrears – falling to 6.8% from 7.39% recorded a year earlier.
A delinquency rate below 7% is generally considered a healthy threshold in emerging market credit environments, suggesting South African consumers are managing their debt obligations with increasing discipline.
Fourth Quarter Trends
TransUnion indicated that the consumer credit market was transitioning from a phase of cautious, tentative recovery into a more robust and broadly-based period of stabilisation. This favourable shift was underpinned by a combination of steady inflation, more predictable interest rate movements, and a tangible improvement in the repayment behaviour of consumers across income segments.
During the quarter, there was once again notable and measurable growth recorded in both the vehicle asset finance segment and the personal loans market. The retail credit market, however, experienced a distinct change in product preference, with consumers gravitating towards smaller, more manageable purchases rather than larger credit commitments.
South Africa’s Reserve Bank, known as the SARB, operates an independent monetary policy committee (MPC) that meets six times a year to review the repo rate – the rate at which it lends to commercial banks, which in turn influences what consumers pay on vehicle and home loans.
Vehicle Finance
South Africa’s vehicle finance market continued its expansion throughout the fourth quarter of 2025, building on the momentum established in preceding quarters. Growth in total loan balances continued to outpace new account volumes, a dynamic that indicated a firmer and more durable recovery in consumer demand. This recovery was meaningfully supported by a more accommodative interest rate environment following the South African Reserve Bank’s decision to cut the repo rate by 25 basis points in November, a move that directly improved household affordability and purchasing power. Origination volumes rose by a robust 9.9% year-on-year.
The gains recorded during the quarter were supported by strong and sustained consumer interest in affordable new car models entering the market. Lenders, for their part, maintained a level of confidence in the market’s direction, contributing to an average new loan amount that climbed by 3.3% year-on-year.
When considering a vehicle loan, borrowers should pay close attention to the repo rate environment. A 25 basis point cut may seem modest, but on a R300 000 loan over 72 months, it can translate into a meaningful reduction in monthly repayments.
One of the most telling developments of the quarter was a significant shift in the used-to-new vehicle financing ratio. The ratio declined to 0.96 used vehicles for every new vehicle financed, a sharp contrast to the ratio of 1.56 recorded in the same quarter of the previous year. This decisive shift towards new vehicle financing reflects the growing availability of budget-friendly new models and the positive influence of favourable inflation trends on consumer purchasing decisions.
| Metric | Q4 2024 | Q4 2025 | Change |
|---|---|---|---|
| Used-to-New Financing Ratio | 1.56 | 0.96 | -38% |
| Origination Volumes (YoY) | – | +9.9% | Growth |
| Average New Loan Amount (YoY) | – | +3.3% | Growth |
| Loans with 72+ Month Terms | 51.9% | 56.4% | +4.5pp |
| Below-Prime Originations (YoY) | – | +20.2% | Growth |
| Account Delinquencies | 7.39% | 6.8% | Improvement |
A used-to-new financing ratio below 1.0 means more new vehicles are being financed than used ones – a relatively uncommon occurrence in price-sensitive markets like South Africa, where used vehicles have historically dominated the financed segment.
Furthermore, a growing number of consumers opted for longer loan terms as a strategy to improve monthly affordability. In the fourth quarter of 2025, 56.4% of consumers selected a loan term of 72 months or more, compared to only 51.9% during the same period a year prior.
While longer loan terms reduce monthly repayments, borrowers end up paying significantly more in total interest over the life of the loan. On a R250,000 vehicle loan at 11% interest, extending the term from 60 to 72 months could add tens of thousands of rands in interest costs.
Ayesha Hatea, director of research and consulting at TransUnion South Africa, noted that the change in the used-to-new finance ratio signals stronger momentum in new-vehicle financing and can also be attributed to shifting consumer preferences in the market.
Personal Loan Market Dynamics
The personal loan market displayed a distinct and notable divergence during the quarter, with bank and non-bank lenders pursuing markedly contrasting growth strategies in response to market conditions.
Bank personal loan originations grew by 10.2% year-on-year in the fourth quarter, with banks extending larger loan amounts specifically to lower-risk consumer cohorts. This more disciplined and targeted approach yielded demonstrably better repayment performance across those portfolios.
Non-bank lenders, by contrast, grew their portfolios at a rapid pace by shifting their focus toward smaller loan amounts. The average new account amounts eased by 2.8% year-on-year, which in turn prompted a substantial 14.7% year-on-year surge in the total volume of originations processed.
Once again, younger borrowers drove a significant portion of this growth across the personal loans segment. The volume of new loans issued to Gen Z borrowers climbed by an impressive 39.6% during the quarter.
Buy Now Pay Later
The retail credit sector displayed clear signs of a strategic and structural shift during the fourth quarter of 2025, driven in large part by the rapidly growing adoption of Buy Now, Pay Later (BNPL) solutions among South African consumers.
BNPL products allow consumers to split purchases into interest-free or low-interest instalments, often without a formal credit check. Global BNPL usage has surged since 2020, with providers such as Payflex and PayJustNow gaining significant traction in the South African market.
The clothing account sector demonstrated resilience during the period, with account originations growing by 7.2% year-on-year. However, other areas of the retail credit landscape experienced a decline in new account openings as consumers shifted their preferences. Retail instalment origination volumes dropped by 19.4% year-on-year, while revolving credit originations fell by 16.6% over the same period.
The following trends were observed across the retail credit segment during Q4 2025:
- Clothing accounts recorded a 7.2% year-on-year increase in originations, showing continued consumer demand in the fashion and apparel category
- Retail instalment credit declined sharply by 19.4% year-on-year, reflecting consumers’ preference for more flexible payment options
- Revolving credit originations fell by 16.6% year-on-year, suggesting a broader shift away from traditional open-ended credit facilities
While BNPL products can be a convenient tool for managing cash flow, consumers should treat them with the same discipline as any other credit product. Missed payments can attract penalty fees and, in some cases, be reported to credit bureaus, potentially affecting a consumer’s overall credit score.
TransUnion’s Q4 2025 Consumer Pulse Study revealed that 57% of South African respondents held a BNPL product, and 36% had used a BNPL product on multiple occasions in the preceding 12 months to pay for goods and services – underscoring just how rapidly this payment method has embedded itself into the everyday financial behaviour of South African consumers.
Conclusion
South Africa’s credit market closed out 2025 on a firmly positive note, with vehicle finance, personal loans, and evolving retail credit products all pointing to a consumer base that is growing in confidence and financial engagement. The sustained five-quarter growth streak in vehicle finance, combined with falling delinquency rates and rising origination volumes across multiple credit segments, suggests that the market’s recovery is no longer fragile but increasingly well-founded. With younger generations stepping up as the primary drivers of credit demand and lenders responding with greater appetite and flexibility, the outlook for South Africa’s consumer credit landscape heading into 2026 appears cautiously optimistic.
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