Car sales down as owners hang on to their vehicles

Reuters pic

PETALING JAYA: Car dealers say they expect vehicle sales for the next two years to remain low as motorists are not changing their cars as often as before.

Federation of Motor and Credit Companies Association of Malaysia (FMCCAM) president Tony Khor said this was because prices of new cars had dipped since 2014, after the government gave discounts and tax reduction on hybrid cars and cars with green technology.

Khor says prices of new cars dipped since 2014 after the government gave discounts and tax reduction on hybrid cars and cars with green technology.

He said this saw prices of new cars drop by at least 13%, making those who bought their cars earlier unable to sell their vehicles to recover their loans.

“Those who bought their cars before 2014 are not trading them in because if they change their cars, they will incur a big loss as they bought their cars at higher prices,” he told FMT.

For example, Khor said, a new car costing RM100,000 would require a 10% downpayment from buyers. With a 90% loan at 4% interest, the repayment total would reach RM122,400.

“The motorist would then be required to pay RM1,134 monthly. After four years, he would have paid about RM50,000 but there is still a balance of more than RM70,000.”

He said by then, the car would not be able to fetch a high enough price to pay off the remainder of the loan.

Khor was responding to figures given by the Asean Automotive Federation (AAF) that showed the sale of vehicles had increased last year in all Asean countries except Malaysia and Brunei.

Total sales in Malaysia fell by 3,450 units to 576,635 from 580,085 in 2016. Brunei meanwhile sold 15% fewer vehicles in 2017 at 11,209 units.

Positive growth, however, was seen in the production and sale of motorcycles and scooters.

Malaysia produced 11% more motorcycles and scooters at 440,673 units last year, compared with 395,938 units in 2016.

Sales were 10% higher at 434,850 units, compared with 396,343 units in 2016.

Lower rate of car loan approvals

Khor said the dip in sales was also due to changes in the way loans are calculated.

Previously, he said, banks gave loans based on an individual’s gross salary.

However, in 2015, banks started approving loans based only on the net salary of an individual, lowering the number of people qualifying for such loans.

“Almost 70% of those buying new cars do so after trading in their old cars. But if people start holding on to their cars longer, sales of new cars will drop.”

Khor also expressed hope that the government would be more lenient in its banking loan rules to allow people to buy cars.

Malaysia auto sales among worst in Asean in 2017