Prices of used cars have been plummeting over the past weeks due to the liquidity crunch the economy is experiencing. A survey I recently conducted shows that prices of vehicles have in most cases been slashed by as much as 50 percent as owners and dealers scramble for the little cash that is available.
The situation is absolutely crazy.
Few example, I came across a 2 000 ML320 priced at US$8 500, a 1995 Honda CRV priced at US$3 800, recent import 2002 Nissan Serena marked at US$4 000, a recent import 1998 30-Tonne Volvo Horse marked at US$28 000, a Mercedes-Benz 1998 E320 marked at US$5 000, a Nissan Wolf 2003 double cab marked at US$9 000, 1995 Toyota 2-tonne truck marked at US$6 000, Toyota Vitz 1999 marked at US$3 500, among others.
However, on the lower end of the market prices have somehow remained relatively firmer averaging US$2 500 for a good car. Obviously this scenario affects various parties in the market differently.
Vehicle dealers are generally affected by low sales, but to me this is the time to buy stocks and prepare them for resale when the business environment begins to improve.
On the other end, individual vehicle owners who are selling are obviously at the mercy of this situation.
However, if you are selling but not necessarily desperate, then I will advise you to take it easy on the market in order to avoid losing more money from your vehicle.
As I have mentioned before, it’s now the in-thing to sell your vehicle on terms as a means of salvaging its actual market value or anticipated value.
There are structures put in place by vehicle sales consulting companies to sell using this option that covers all the legalities and risks involved. The market for people interested in buying cars on terms remains untapped in this country, hence there is no reason really to keep your car in a car sales lot for long.
However, this scenario demonstrates the vulnerability of cars as assets whose value easily gets eroded by temporary economic pressures.
Looking at the bigger picture, my view is that the market is now self-manifesting the need for sellers to accept payment on terms as is the case in other countries. I’m glad to note that there are some companies that have already come up with similar schemes for vehicle purchase on terms.
The companies have crafted proper financial packages in line with prevailing interest rates and repayment structures.
However, it is very critical that buyers analyse the nature of agreements to ensure that the prescribed terms are reasonable and practical to avoid highly punitive structures that reverse the gains of buying on such flexible terms.
While depreciation of cars is now a reality that is certainly affecting us, this is the time when the value of your buying prudence pays off.
I have generalised the effect of depreciation and how the market has nosedived of late, but there are certain brands that retain value more than others.
The first name of a vehicle can have a tremendous effect on its resale value, regardless of its condition.
So while the wind of depreciation or economic turmoil may sway over the industry, cars which are brand names retain value while others are being affected.
Mercedes-Benz, Toyota, Isuzu and Nissan are the best locally in retaining better value.