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Why this is the best time to buy used car

By John Mutua August 14th, 2020 2 min read

Dealers in used cars have been forced to cut prices by up to 15 percent in response to depressed demand in an economy reeling from the effects of the Covid-19 pandemic.

Mazda Demio, Toyota Fielder, Toyota V8 and Subaru Outback are among the popular models whose yard prices have dropped by a range of between Sh100,000 to Sh1.2 million since the country recorded its first confirmed case of the coronavirus on March 12.

Dealers say they have been forced to cut prices to clear stocks in a market where the more a car remains unsold the more it loses value, partly due to a greater preference for the latest number plates.

Small business owners and professionals are the main buyers of second-hand cars and most of them have seen their incomes fall significantly from a mix of layoffs, unpaid leave, salary cuts and collapse of activity in various sectors.

Distressed sales of cars seized by banks and auctioneers have also served to expand supply in the market, further putting downward pressure on prices.

“People (dealers) have been forced to throw them away and there is no money flowing in the economy. Demand is not there. Dealers are stuck with the old stock from last year,” said Charles Munyori, the secretary-general of Kenya Auto Bazaar Association, which represents used car dealers.

Dealers make profits as low as Sh100,000 on some models, meaning that they risk having to merely break even or suffer losses in these crisis times.

Mr Munyori said that dealers will struggle to make sales up to the end of the year even after the State relaxed the Covid-19 restrictions and allowed a phased re-opening of the economy.

“The year is basically written off. We expect things to start picking up from the end of the first quarter next year,” Mr Munyori added.

Motor vehicle registration data shows that sales of saloon cars such as Toyota Corolla fell the most at 46.5 percent to 2,256 units in the five months ended May from 4,219 units a year earlier. Sales of station wagons like Subaru Outback also dropped 36.4 percent to 18,934 units from 29,772 units.

Overall registration of cars, including pick-ups, minibuses, lorries, trailers and buses, fell 36.5 percent to 27,250 units in the five months to May.

Dealers had earlier anticipated a rally in car prices from supply chain disruptions brought by the pandemic.

But the economic fallout from the virus has proven to be the larger factor, sapping demand and pulling down prices for existing stocks and new arrivals.

The price of the 2013 model of Toyota V8 — a large SUV popular with entrepreneurs and government officials — has dropped the most to Sh8 million from Sh9.2 million pre-coronavirus.

A Subaru Outback station wagon manufactured in 2014 can now be bought at Sh2.3 million, down from Sh2.5 million.

This story first appeared in the Business Daily