Published on May 19th, 2020 | by Hammer0
The used car market is going to plunge soon
The used car association in Malaysian is led by big established players who have been in the business for decades and they are now joining forces to ensure their stock values do not plummet. It is also like a cartel working to ensure their survival against this odds. The market movement downwards is a global trend and the used car big boys, just like the property players, cannot change this trend.
A recent article in a popular Malaysians newspaper ran a press release from a source from the Malaysian used car market saying that the Malaysian used car market has been doing well since the easing of lockdown and very soon used car sales will be better than new car sales.
We found this statement to be very suspicious as we have seen used car dealers discounting their products on their online advertisements week after week to attract customers.
Then we called the few used car dealers that we know personally and they all replied with the same reaction. Sales down with little walk-ins and we have to clear our stocks as quickly as possible as new car prices will move downwards with old stocks from 2019 (last years left over stock) needing to sold at attractive discounts.
Note. When a new car price drops, the same model used car price will also drop. This is why when a car model is about to be superseded by a brand new version, the old model gets a hefty discount at the showroom because car manufacturers needs to clear all existing stock to make way for the brand spanking new model. This directly affects the used car value of the same model car from five to eight years ago.
Now with the used car dealer, they need to hedge their investment (bet) with every car they buy into their business. This is why they buy low and sell high. It is business and there is no crime in the money they make.
Now, there are some fast selling cars that used car dealers like. Example, the Honda Civic, Perodua Myvi and the Mercedes-Benz E-Class. These three cars sit in three different segments and used car dealers can in good times turn the sale around as fast as 24 hours and make a few thousand ringgit easily. But with less attractive cars like Peugeot 207, the Volkswagen Passat and the BMW X5 the turnaround time can be weeks, maybe even a few months. So the profit margin has to be almost double of a fast turnaround used car.
Now, during this lockdown there was a long wait for any car to be bought or sold as no transaction could be completed because JPJ and also Puspakom were closed. Without the Puspakom vehicle inspection, no vehicles transfer of ownership could be completed.
So this is why the smaller used car dealers will be feeling the pinch right now as the customer base has shrunk and the finance companies are being tougher with car loan approvals and worst hit are buyers who have been hit by a pay cut or even worse, a job loss.
This is also why car auction houses are seeing a drop in business and we have also been informed some used car dealers have decided to clear their existing stock at their purchase price and exit the business until further notice.
At the time of publishing we know that a mid-sized used car dealer in Kampung Subang with 60 plus cars in stock has closed until further notice and a few other smaller used car dealers (with 15-30 cars in stock) in Gombak and Selayang have shut their business.