Used cars fall in price miserably, selling at a loss but still no customers

The price of new cars on the market has continuously dropped sharply, leaving used car dealers unable to react. Some used car models that were previously popular are now being sold at a loss to recover capital.

Rapid price reductions in cars have caused many used car dealers to face many difficulties.

Are used cars still attractive?

The used car market is being affected by the price reduction race of manufacturers and distributors. The sharp drop in new car prices in just a few weeks has not only caused consumers to have a wait-and-see mentality, but also those who need to use cars at this time are no longer interested in the option of "buying" used cars, which has many hidden risks.

According to used car dealers, in the past, with a budget of about 400 - 500 million VND, many first-time car buyers often chose to buy used cars. At the same time last year, used car models priced at 400 - 500 million VND sold quite well. However, now with that amount of money, customers have no shortage of choices when new car models in the B-segment such as Toyota Vios, Mitsubishi Attrage... continuously have sharp price reductions.

Having just obtained a B2 driver's license at the beginning of the year and planning to buy a car for service, Mr. Quang Binh in District 2, Ho Chi Minh City said: "With only 400 million VND saved, at first I was hesitant about two options: waiting for the car price to decrease or buying an old 2014 Toyota Vios E. However, in early May 2017, when I heard that Toyota dealers were reducing the price of the new Vios, I tried to borrow nearly 100 million VND to buy the manual Vios 1.5E version. The price difference is a few tens of millions, but anyway, buying a new one still feels more secure."

Currently, used cars are often divided into 3 segments depending on the model, year, and condition to determine the selling price. In which, with 300 - 400 million VND, consumers can buy a used car. The segment priced from 500 - 600 million VND and from 800 - 900 million VND includes C-class cars from 2014 onwards or 5 - 7 seat high-chassis SUVs. For over 1 billion VND, most customers choose to buy used luxury cars imported to Vietnam. "Although there are quite a variety of models and prices, the fact that new cars are discounted too quickly by manufacturers and dealers, the reduction is up to tens of millions, making used cars priced from 400 - 600 million no longer as attractive as before." The owner of a used car shop on Highway 13, Thu Duc District, Ho Chi Minh City said.

Used car dealers 'suffer' due to falling prices

According to some used car shops on Pham Hung Street (Binh Chanh District), National Highway 13 (Thu Duc District)… Since the beginning of the year, the number of customers buying used cars has decreased sharply compared to previous years. The decrease in purchasing power has caused some shops to always be empty of customers and struggle to maintain business.

Mr. Duc Toan, owner of a used car shop on Pham Hung Street, said: “Last year, the number of transactions was better than the beginning of the year until now. If in previous years, we could sell 1-2 cars per day, in recent months it has taken 3-4 days to sell 1 car. With the current market, any shop that sells 10-15 cars per month is considered very successful.”

In contrast to the scene of car dealerships springing up like mushrooms after a rain a few years ago, according to Mr. Toan, from the end of last year to the beginning of this year, many dealerships had to close down and quit their jobs due to poor business. “Each car in the dealership costs several million VND per month for premises, fuel for customers to test drive, and interest… So now, when buying a car, you have to carefully calculate and have a business strategy, otherwise it will be difficult to survive because the market is now very different from before,” Mr. Toan added.

Even on An Duong Vuong Street, District 5, an area that is home to many shops selling used cars, services, and auto parts, has been quite deserted in recent months. The number of customers is mainly concentrated in shops selling spare parts and accessories. Many shops specializing in selling "used cars" imported from abroad, which used to attract customers, are now unable to avoid the situation of being sluggish. A used car shop owner in this area said: "These models are known as used cars, but in general, they are still very new, and the profit margin is also higher than domestic cars. However, due to the high price and the lack of customers, sales are very slow."

Not only that, the continuous price reduction of new cars has made used car dealers unable to react. Some used car models have just been purchased for a few days and have lost tens of millions of VND due to not being able to sell. The owner of a used car dealership on Pham Hung Street said that two weeks ago, his store purchased a 2013 Mazda CX-5 for 730 million VND. However, a few days ago, he had to accept selling it at a loss of 30 million VND to push the car to recover capital to maintain business operations. Because the longer it is left, the heavier the loss when the price of new cars decreases too quickly. Previously, in early June 2017, Truong Hai (THACO) continued to announce a discount program of 30 - 40 million VND for the Mazda CX-5 model. The price of new cars is only 849 - 950 million VND, causing used cars to continuously fall in price.

According to used car dealers in Ho Chi Minh City, currently, in addition to the Mazda CX-5, Mazda6... models, some other car models such as Ford Focus, Honda CR-V are also falling in price very quickly. The hardest to sell are used Ford models, because customers do not like them, so dealers are forced to reduce prices deeply in the hope of selling used cars. A representative of a used car dealer on Highway 13 said: "New car prices are plummeting, so if you do not follow market prices, you will see a loss after buying used cars for a few days. My shop bought back a 2014 Ford Focus that had traveled more than 60,000 km a month ago for 580 million VND, now it has to accept a loss to sell but there are still no buyers. Car prices now fluctuate faster than the price of gold, so we have to monitor it every day."

The information that import tax on cars from ASEAN countries to Vietnam will be reduced to 0% starting from 2018 is causing many consumers to wait. This has somewhat affected purchasing power in the market. However, some opinions say that it will be difficult to have cheap cars in Vietnam after 2018, when in addition to import tax, cars are still affected by many other taxes and fees. Therefore, in the future, used cars are still considered a feasible option for customers with limited budgets, first-time car buyers or those buying cars for service. However, to adapt to market changes in the coming time, car businesses need to have a suitable product distribution plan, while exploiting markets with much potential.

According to TNO