'Wait and see' attitude in second hand car market?

by Manjula FERNANDO

The second hand car market seems to have suffered a setback due to the newly introduced import tax regime. Buyers anticipating a big drop in second hand vehicle prices due to the inevitable price slash in brand new and reconditioned vehicles have adopted a 'wait-and-see' attitude.

Vehicle dealers said that due to the 'wait-and-see' attitude of buyers there has been a significant drop in second hand car sales within the past month. The new customs tax regime which proposed up to a 50 per cent reduction in the existing import tax component came into effect on June 1.However, despite the buyers' wish, the prices of used vehicles have remained unchanged or not come down as much as the brand new and reconditioned vehicles because the owners were still reluctant to sell the vehicles under the expected range.

"The sellers are still trying to get the best price for their used cars. But once the new shipments at the reduced prices swarm the market, the owners will have to give in ultimately," said Aruna Perera of Siva's Car Sales at Kohuwala adding that it would be a gradual process.

He said a Maruti car with a H series number plate can be sold at Rs. 570, 000. Before June it costs Rs. 675,000 - Rs. 700,000.

A used Toyota Prado which cost Rs. 12 million earlier can be bought for Rs. 8.5-9 million and a Mitsubishi Montero which was sold for Rs.9 million earlier can be now purchased at Rs. 6.5-7 million.

However, the value of discontinued models such as Toyota Starlet will not see much of a difference. A Starlet with an English number plate can still be sold for Rs. 1.3 Rs. 1.5 million he said.

He said due to the small margin in used and unregistered car prices there may be a big demand in the near future for unregistered vehicles. However, an increase in used vehicle prices in Japan has been observed due to the heightened local demand.

Vehicle Importers 'Association Secretary Zeeniya Rasheed said that the rush for reconditioned vehicles in the local market has created an artificial demand in countries such as Japan.

This will be reflected in the prices of re-conditioned vehicles once these shipments arrive in about three to four months. A sea passage between the EU and Japan takes about three to four months.Rasheed said that brand new vehicle prices dropped from 25 to 30 percent last week. "The dealers were selling their stocks at lower prices hoping to cover up the losses with their new shipments."

A brand new Toyota Hilux double cab which was sold at Rs. 11.5 million earlier can now be purchased at Rs.6.7 million. The price of a Toyota Allion, another popular car in the market, is currently sold at Rs.6.5 million, down from Rs.9.5 million earlier.

The Customs Department Motor vehicle unit official said there was a significant increase in the number of vehicles cleared at the Customs during the past month following the tax reduction.