Mon | Apr 24, 2017

Borrow within the budget - Used-car dealer raps financing imbalance

Published:Sunday | September 21, 2014 | 9:00 AM
The Daihatsu Boon, recommended for those earning up to $80,000 after tax. - Contributed
The Toyota Passo, for persons earning up to $80,000 monthly after tax. - Contributed
The Honda Fit, fit for persons earning up to $100,000 net monthly. - Contributed
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Sheldon Williams, Gleaner Writer

Paul Constantine, owner of used-car dealership Cars R Us on Half-Way Tree Road, St Andrew, believes buyers are being lured into incurring debt by lending agencies which are quicker to finance new, rather than used, purchases.

He said middle-income earners are enticed to take up loans which are so burdensome it

sometimes leads to the vehicle being repossessed. So, Constantine said, while a used car is a better choice for the average Jamaican, the higher downpayment required increases the pressure on the consumer's pocket.

"It is not conducive for the middle class, who
usually buy used cars, to go into the bank and get financing, because
of how it is set up," Constantine said, noting the relatively high
deposits required for used cars. "We have to think about the middle
class who don't have the monies set aside to buy these vehicles," he
recommended.

He said the excitement of owning a new
car is short-lived when the expenses start to add up. "When you are
forced to buy a new vehicle, you really can't keep up with the payments,
because people have to put food on their table and they have to pay
their light bill and they have to pay rent, " he said. " All you have to
do is to pay 10 per cent down, which sounds good at the beginning. All
you have to come up with is the insurance and the deposit, but next year
when the insurance comes up, where you going to get it from?" he
asked.

However, Constantine said, for the most part,
Jamaicans are realising their priorities and making realistic purchases
that fit their pockets - small cars. These are "particularly ladies.
Like a Yaris and like a Mazda Demio. I've seen where people downsize.
They can't bother with the monthly payments and the gas bill. So they
come in with their top-end cars and ask for small
cars."

Making the adjustment is not an issue. "They
don't have a problem with it. I see people driving small cars while they
have their big cars parked at home," Constantine
said.

President of the Jamaica Used Car Dealers
Association, Lynvalle Hamilton, admitted that while small cars are not
the first choice for most consumers, they move units. "They have become
quite convenient to persons who are not at the top of the ladder.
Persons realise that, if they try to go outside their pay scale, they
will not qualify for a loan. But most persons, to avoid the hassle with
the bus and the taxi, they would buy that small car," Hamilton
said.

Constantine said it is worth the expense to buy a
used vehicle and get good financing. "I think the credit unions are
really working towards what the people want, " he said. He reasoned that
the value of used cars will increase as owners gradually add
accessories. In addition, maintenance is key. "I've sold people cars and
they fix it up. If you got a good deal on a Honda Civic and you take
your time put on your rims and your spoiler and your LED lights, the
value will increase on you. When you buy a new car, all it does is
depreciate on you," he said.

Hamilton said there are
numerous other factors that affect consumer purchasing power. "You have
the wage freeze and the slide in the dollar and it causes the price of
cars to go up considerably," he explained. These factors inevitably
affect a potential purchaser's qualification for
financing.

Hamilton gave a price range for used cars
that consumers in a number of income ranges should aim for in order to
allow for comfortable monthly payments.

For persons
making $80,000 after tax, he recommends the Daihatsu Mira, Move or Boon,
Mitsubishi Colt, Toyota Passo and Nissan March, which go for an
estimated price range of $690,000 to $1,100,000. The Nissan Tiida,
Toyota Belta, Honda Fit, Mitsubishi Lancer from 2009 - 2010, which cost
about $1,200,000 to $1,350,000, are suitable for those taking home up to
$100,000 after tax.

Hamilton named the 2009 Toyota
Corolla, 2010 Nissan Bluebird and 2012 Suzuki Swift among the vehicles
suitable for those earning up to $120,000 after tax, while those taking
home above $140,000 can go for the newer model Toyota Corolla or Honda
Civic, which cost $2,000,000 and
upwards.