Sharp fall in prices of used cars

Finweek English Edition - - Cover -

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.

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