Marcella Scarlett, Business Reporter
The Jamaica Used Car Dealers' Association (JUCDA) is urging customers to brace for higher prices come next year as several variables it says are out of the control of traders will contribute to increased costs.
"The same low prices customers enjoyed for the better part of this year will not continue," said Lynvalle Hamilton, president of JUCDA. "It is definite that car prices are going up next year. In fact, they have started to go up already," he added.
"We will definitely see an increase in prices when the new year starts. Probably you will see a movement of about 10 to 15 per cent, initially, in the early part of the year," Hamilton told the Financial Gleaner earlier this week.
He explained that several factors in the source market, along with international competition, will influence prices going skywards in Japan, which would ultimately push up the prices for used cars domestically.
"The international competition is affecting the prices in Japan, plus the Japanese people are holding their cars for longer now. So fewer cars are available to us because they are not selling, and more players from other countries are looking to buy from this smaller pool," Hamilton explained.
He said more populous countries such as Sri Lanka, New Zealand and Pakistan were demanding more and more used cars.
Moreover, demand from Pakistan have increased rapidly since changes in their motor vehicle import policy in 2010, which saw an increase in the age limit and reductions in the duties charged."Pakistan recently amended (its) motor vehicle import policy and they have gotten a five-year policy now, coming from a three-year policy," Hamilton said.
"These other players can afford the higher prices. We cannot bid as high as they can when we go to auctions, and they are willing to pay more than we can afford to pay because they have a ready market to sell to who are willing to pay the higher prices," he said.
According to a report in Pakistan's Daily Times, titled 'Auto industry suffering due to car import policy', it is predicted that the number of used cars imported into Pakistan could reach 50,000 for fiscal year July 1, 2012 to June 30, 2013. This compares to the average 4,000 per year prior to 2010.
Additionally, there was a change in the duty structure resulting in significant reduction in duties and a fixed import duty structure, irrespective of the make and brand of the vehicle.
Hamilton anticipates that it will become increasingly difficult to source cars from Japan in the coming year, thereby reducing the supply in the local market and causing upward pressure on prices.
Depreciation impacting prices
Closer to home, Hamilton said the depreciation of the Jamaican currency vis-à-vis the United States currency will also impact prices. However, he is hoping that a realisation of the much talked about International Monetary Fund deal with the Jamaican Government will provide some cushion for the currency and increase investor confidence.
At the close of trading on Tuesday, the Jamaican dollar was selling at $92.39 for US$1. Year to date, the dollar has lost $5.75, representing a depreciation of 6.64 per cent.
"Right now, we are selling so many cars ... people are definitely buying cars now," Hamilton said. "Some of the dealers are also trying to buy a lot of cars from now at the lower prices to have them to sell next year. Some of them are doing what you call hoarding ... holding it back for next year when they can fetch higher prices," he said.
"The prices that we would have enjoyed earlier (this year) have been increasing and they are going to continue to increase," he said.
"Cars are really selling right now," the JUCDA president acknowledged. "But even though some dealers are trying to hold stock right now they still have to sell, and those who are selling may be out of cars by end of January, because everybody is buying now because they are anticipating a rise in prices."
Hamilton added that "consumers recognise what is happening and they are definitely trying to take advantage of it".
In the meantime, Kent LaCroix, president of the Automobile Dealers' Association, which represents new-car dealers, does not foresee any imminent price increases.
"We don't see any increase," LaCroix told the Financial Gleaner. "Even with the falling sales we just have to try something else. But some increase may depend on the currency we are paying for the vehicles in and the type of credit arrangement the dealer can get from the supplier."