Cars for cash - Some autos now cheap enough to buy out of pocket; banks say loan demand still up
A window that was opened in the motor policy for the import of older vehicles has been shut after less than two years, but used-car dealers say it lived long enough to skew the market.
The older eight-year-old autos coming into the market as a result of the policy shift were cheap enough to be bought for cash, and their influx has driven local banks and other lenders to compete by offering borrowers more generous terms on new-car purchases, said Lynvalle Hamilton, president of the Jamaica Used Car Dealers Association, JUCDA.
The cars were supposed to be used for taxi services, but Hamilton says not all dealers got the taxi import licences and further that some older imports ended up in personal hands as the policy was not properly policed, and so it “affected the market negatively”.
The policy was implemented around mid-2017, but a notice on the Trade Board’s website indicated that it was suspended this past January. The agency promised a response on the number of licences granted for the older cars and whether their use as taxis was being tracked but was unforthcoming with the information up to press time.
However, Hamilton estimates that more than 4,000 older vehicles may have been imported under the revised policy, subject to Trade Board verification, and that some of the units were being sold cheap enough to be bought for cash.
“We are talking about eight-year-old cars. It has been going on for over a year. They are selling for like $1.2 million down to $800,000 and even $700,000. They are really nice cars,” Hamilton said. “If someone has that sort of money, they are not going to [seek] financing from the bank,” he said.
Both Hamilton and Kent LaCroix, chairman of the Automobile Dealers Association, say the auto market is currently in a seasonal slump.
Loan deals tend to be on offer in such periods, they said. But the JUCDA president also insists that the reason offers are “more prominent now is because the Government has allowed special licences for older cars. Persons who would normally take a loan and buy a younger car, they just purchase those cars”.
Jamaica’s largest bank, NCB, is now offering auto loans at 6.99 per cent interest and zero deposit, and its advertising promises that no loan payments are expected until 2020.
The bank told the The Sunday Gleaner that its current loan terms were in response to customer needs but asserted that loan demand had not slowed. Customers get nine years to repay under the current offer, NCB said.
Similarly, Scotiabank Jamaica’s Executive Vice-President of Retail Banking, Audrey Tugwell Henry, says that auto loan demand is up at the bank year on year. The bank’s loan rates for new and pre-owned vehicles now range from 7.15 per cent to 7.39 per cent. Borrowers for new-car purchases get eight years to repay. Rates are reviewed regularly by Scotiabank, Tugwell Henry said.
Under Jamaica’s motor vehicle import policy, the standard age limit on imports is five years, but that was adjusted to eight years for cars that would be used as taxis. Hamilton said the eight-year-old vehicles were permitted because the Government wanted to improve the quality of cars being used in public transportation.
A press release issued in May 2017 by the Transport Authority in endorsement of the policy change at the time said that taxi operators were frequently challenged to source funding to upgrade their ageing vehicles, and that the policy adjustment was expected to reduce the cost of improving the fleet of taxis used in public transportation.
The Trade Board says on its website that effective January 2019 no more licences for eight year old vehicles would be approved. However, the motor car import age is being lifted from five to six years, the agency said.
Hamilton, who also runs his own preowned car dealership – Auto Channel Jamaica Limited – says there are now thousands of cheap cars on the market, resulting from the taxi initiative.
As for the performance of his own dealership, Hamilton says Auto Channel has increased sales by 20 per cent because he had turned to purchasing cheaper cars in order to compete.
“Nothing over $1.5 million to $2 million. Bluebirds, Honda Fits, Suzuki,” he said, listing cars that fall into the cheaper category on his lot.
Comparatively, Hamilton added, the used car market is down 20 per cent, year on year, due to slower take up of pricier inventory.
However, he painted a rosier picture for new-car sales, which he said were now doing better because banks are offering auto buyers improved loan repayment terms of eight years, and “in some instances they are even extending it to 10 years,” he added.