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Stabroek News

Used-car sales down... But some dealers doing good business
published: Wednesday | December 6, 2006

Susan Gordon, Business Reporter


Used cars on a dealer's lot in Kingston. - File

Sales on used motor vehicles have slumped by about seven per cent so far this year, says president of the Used Car Dealers Association of Jamaica, Kenneth Shaw, but some sellers argue they are experiencing the opposite or see no significant change in their sales pattern.

Shaw said the change in import policy and payment schedule for general consumption tax (GCT) implemented September 2006 and increased demand for the US dollar since October have resulted in depressed sales.

"Things have slowed down considerably," said the UCDA president.

"Every year around October to December, there's a run on the dollar. We've become accustomed to this, and it never rolls back in the New Year," Mr. Shaw continued, adding that this has an effect on the cost of doing business and prices to consumers.

Not all dealers, however, are seeing a drop in business.

Still booming

Mack D's Kingston branch manager Ava Dawn Ware said "business has been booming still", while managing director of Crichton Automotive Limited in Montego Bay, Kirk Crichton, said the changes in the tax regime had reduced his storage costs by about 20 per cent.

Storage, he told Wednesday Business, is about a fifth of his operational costs.

"I would say this year is a little better for me," said Crichton, adding that this could be because he pumped more capital in the business.

Christopher Houlker, sales manager at New Line Motors, said too that November was a high point for sales at his company.

"This year is much better than last year, by far," he said, adding that persons usually buy cars before December.

Shaw told Wednesday Business that since 2004, there has been a more than 30 per cent decline in the sales of imported used vehicles with some 22,000 units sold at the end of 2004 versus the 15,000 vehicles sold in 2005, and 14,000 units sold up to the end of November 2006.

The erosion, relative to 2004 sales, is 36 per cent.

He's not overly optimistic that December sales will see a significant boost, despite the traditional high spending during the Christmas season.

"Cars don't really sell at Christmas," said the used-car dealer.

"People are looking at consumer items; they don't buy cars for gifts."

Furthermore, he said, dealers as of November cannot bring in cars older than 2004 models for sale, which means car prices on the lots will be more expensive.

At the start of October the Jamaican dollar was selling at an average rate of $66.01 to US$1. On Monday December 4, the exchange rate was $66.97 reflecting a depreciation of 96 cents in the space of two months.

"I don't see it looking pretty for us but we hope for the best," said Shaw.

On September 1, 2006 the Tax Administration Department stipulated that motor vehicle importers without bonded warehouse facilities would have to pay their total aggregate duty of 180 per cent, which includes basic import duties and GCT, on their full complement of motor vehicle imports.

Those without the bonded facilities, mostly the used-car dealers, were told to post a bond with cash or collateral which is equal to the total value of the import duty payable on the number of vehicles they have stored in warehouses, plus the respective GCT charges.

At the time of implementation, dealers predicted that the move would force them to scale down their businesses, adding that vehicle costs would likely increase by four to 10 per cent.

Crichton said used-car dealers are now trying to find less expensive vehicles which are still attractive to sell as a means of countering the rise in prices caused by the change of year and the steady rising dollar.

susan.smith@gleanerjm.com

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