Sharp fall in prices of used cars
OVER THE PAST three months, the prices at which reasonably new second-hand passenger vehicles are sold or traded in have fallen to between 25% and 50% less than the so-called trade-in book values that were generally accepted until recently.
That means the current cash or trade-in value of every passenger vehicle bought in the past three years on a 60-month instalment plan is now worth less than the outstanding value at the bank. That’s right – just about every Flash Harry who passes you on the motorway – especially in a large car or a sports utility vehicle (SUV) – probably owes more on his car than it’s worth.
The wheels of the motor industry are coming off – all four. Perhaps even the spare as well. That will affect car owners, motor dealers, spares manufacturers, investors in the industry, banks that provide finance and South Africa’s entire economy.
Dealers agree that especially over the past three months there’s been an almost total collapse in the value of second-hand cars. That will put further pressure on new vehicle sales. Sales of passenger vehicles stood at 155 645 for the first six months of 2008 – 19% down on the corresponding period last year. The 5 000 or so vehicles per month apparently currently being repossessed by financial institutions and being sold on auction put further pressure on the prices of used vehicles.
Few motorists can afford to pay the shortfall between the trade-in value and the outstanding amount to pay off the value of their car, and for them there’s only one option left: stick to your old car and pay it off happily if you can. The dream of trading in your car and using its value as the deposit for a new one doesn’t work any more. Be glad if you can sell it for the outstanding amount.