Used Cars Value and Rupee Depreciation
  Sep 06, 2023      

Used Cars Value and Rupee Depreciation

Pakistan is a very odd location for both new and old cars. A new car may be purchased, used for many years, and then sold for considerably more money. The growing cost of vehicles and the crazed market for secondhand ones are caused by a sinking currency, a protectionist market, and high inflation.

However, since used cars are at the very bottom of the issue chain, they are not to blame. The selling of new autos is actually when things start to go berserk. To begin with, auto manufacturers purposefully make fewer cars in order to keep a demand-supply imbalance in their favor. The hoarders—often referred to as "investors"—then purchase brand-new cars in large quantities and sell them at a premium to actual customers. The hoarders, dealerships, and the actual assemblers are said to split the profit.

Then, at least based on what we have seen in recent years, automobile costs are changed every other month owing to changing currency values, with each model experiencing an increase of up to 30% annually. Since December 2017, the cost of domestically produced automobiles has doubled, with secondhand car prices also rising at the same time.

If you pay attention, a used automobile that is five years old is currently being sold for double what the invoice price was in 2017. For instance, the top-spec Honda Civic Oriel 1.8L was sold for PKR 24.99 lakh in December 2017, and today, after 5 years, it can be found for as much as PKR 48.0 to PKR 52.0 lac on the used vehicle market. The price of the newest Honda Civic RS has also increased to PKR 80.99 lac.

A premium In December 2017, the Honda City Aspire 1.5L has purchased at PKR 18.69 lac, and its owners are now absurdly seeking up to Rs 4 million for the vehicle.

Similarly to this, the used automobile market is asking for almost Rs 5.0 million for a Toyota Corolla Altis Grande that cost PKR 25.49 lac when it was brand-new in 2017 and has a few thousand kilometers on the odometer. The Toyota Fortuner 2.7L, which cost PKR 53.99 lac when it was brand-new in 2017, is now selling for up to Rs 1.25 crore on the used auto market.

Despite how absurd this seems, we actually can't hold used-car dealers responsible. Obviously, given that the new automobile is currently priced at Rs 6.0 million, it is unrealistic to expect them to sell their five-year-old cars for approximately Rs 2.0 million if they originally purchased them for Rs 2.5 million. The market for new automobiles, which determines used car prices, needs to be kept in check.

But because of issues including lack of a price control mechanism, unregulated hoarding presence in the market, and unbalanced supply and demand, insufficient localization, and economic uncertainty, new automobile prices in Pakistan are always out of control. The situation for the automotive sector, both new and used, doesn't appear very promising given the present economic difficulties and the Pak Rupee's record-low value versus the US Dollar. We can only wait and see where this stone will end.