Old is gold: High prices force people to defer plans for new cars

Car owners hang on to old vehicles.

LAHORE:

A hefty increase in prices of new vehicles, coupled with persistently high inflation, has forced car lovers to have second thoughts about their purchase plans for new four-wheelers and hang on to the vehicle they currently have for a much longer period.

In the face of this, car owners will change their vehicles “only when they find it necessary”, say market people while talking to The Express Tribune.

According to a survey conducted by Pakwheels.com and YouGov, currently around 65% of cars on roads of Pakistan have been repurchased by the owners. In the previous three years, about 40% of cars purchased around the country were used cars.

“This high percentage of used cars indicates the change in preference of people from brand new to a second hand car,” an expert associated with the automobile industry commented.

The survey shows that Khyber-Pakhtunkhwa leads other provinces in usage of second hand cars. In the province, around 73% of residents own a second hand car, followed by Sindh with 69%, Gilgit Baltistan 63% and Punjab and Balochistan 62% and 57% respectively. In Islamabad, used cars have a share of 65% in total cars running in the capital city.

According to industry stakeholders, majority of people, who were earlier changing their used cars within one year of purchase, have now extended the period and are
keeping the vehicles for over two years in most cases.

Affordability factor is behind this change as the buyers need to add a substantial amount for exchanging their used car for a better one. In most cases, this is out of reach for most customers. Instead, the car lovers are now giving more attention to regular maintenance.

The industry people say cars bought in the previous century are being held for longer periods compared to those purchased in the running century. The reason for this once again is unaffordable prices of used vehicles, which go up in line with prices of new vehicles.

The survey reveals some interesting facts about four most popular brands of car. Thirty three per cent of Daihatsu, currently owned by people, comprises previous century models while Honda models of that period have a share of 13%. Suzuki and Toyota models enjoy a share of 23% and 18% respectively in this category.

According to industry, a huge influx of imported used cars has hurt the domestic automobile market, but at the same time it has given people a wider choice with reasonable prices. But once purchased, they point out, these reconditioned cars are hard to sell again as the markets and ports are flooded with imported brands.

“The car resale business has shrunk markedly when compared with the boom enjoyed in 2005,” said Zafar Iqbal Goraya, a Lahore-based showroom owner. “This shows that people prefer to keep their existing vehicles until some major breakdown happens.”

Published in The Express Tribune, September 10^th, 2012.