Used car business hits a bump

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PETALING JAYA: Used car dealers, hit by losses of up to 50 per cent in their profit margins in the first half of the year, are venturing into the food business.

Malay Mail today quoted Kuala Lumpur and Selangor Car Dealers and Credit Companies Association president Khoo Kah Jin as saying zero growth is expected in the second half of this year – due to factors like the price of new cars and banks being too strict in approving loans.

“Five years ago, dealers could purchase 100 cars a month and sell 50 per cent of their stock, but now they purchase less than 50 units a month, in the hope of selling at least 10 cars.

“In 2010, I could apply for 10 loans and get five approved whereas now I would only get one approval,” he was quoted as saying.

Due to the slowdown in business, many of the association’s members have left the industry to set up food businesses, added Khoo. The association represents about 3,000 used car dealers with a collective inventory of 100,000 vehicles

Those who have switched industries are not free from burden, as they are still stuck with unsold cars, said the report.

The report also spoke to Tony Khor, the President of the Federation of Motor and Credit Company Association of Malaysia, Kuala Lumpur and Selangor, who pointed out that last year, 400,000 units of used cars were sold last year, while 670,000 new cars were sold in the corresponding period.

He listed down four factors which were hitting the industry hard – namely the tightening of loan approvals by banks, the GST which was mostly borne by dealers, resulting in lower gross profit for dealers, the aggressive promotions and marketing used by new car dealers, and when dealers purchase from sellers once the value of a new car has dropped.

According to Khor, the fourth factor would see the sellers’ remaining outstanding settlement to the bank being higher than the market value of the vehicle, despite him (the seller) having put up a 10 per cent down-payment and making prompt monthly repayments. Khor said 40 to 50 per cent of cars sold to dealers are affected by this factor.

Khor urged the International Trade and Industry Ministry to include the federation when it wants to review the National Automotive Policy (NAP), which was introduced two years ago, to help and remedy the ills faced by the industry.

“Let us participate more (in the process), we will be happy to share and give some input for them to consider.”