Used car market is gloomy: People tighten spending, limit borrowing to buy assets

The used car market is in a rare state of depression and sluggishness near Tet. Photo: Khanh Linh

Difficulties surround, gloomy market

Normally, the last months of the year are considered the peak season for used car dealers, because the demand for travel during the Lunar New Year holiday of Vietnamese people increases.

However, this year, the used car market is considered by dealers and showrooms to be relatively gloomy even though it is close to the 2023 New Year, the main reason given is the impact of the general economic situation, causing people to tighten spending and limit borrowing to buy assets.

According to Lao Dong, the shopping atmosphere at some used car stores and dealerships in Ho Chi Minh City is relatively quiet in the last month of the year. Used car stores and showrooms are often empty of customers.

Some showroom owners and used car dealers shared that there are still transactions in the market, but the quantity is not much and mainly focuses on cars in the affordable price segment and transactions are in cash.

"Normally, when buying a car, customers often use options such as bank loans to buy a car in installments. However, this year, bank interest rates have continuously increased, making many customers hesitant to buy a car during this period," said Mr. Nguyen Trong Giap - Director of Saigon Car (National Highway 13, Ho Chi Minh City).

Similarly, Mr. La Trung Tinh, Sales Manager of a used car showroom on Nguyen Van Linh Street (District 7, Ho Chi Minh City) commented that instead of having to pay additional loan fees, many customers are postponing buying a car or switching to buying a cheaper car so as not to have to depend on the bank when the current interest rate combined with the fees has reached about 15%/year. It is estimated that the sales in the last 2 months of 2022 of this showroom will only reach 20-30% compared to the previous October.

"In the past month, some used car models in the popular segment with prices ranging from 400-500 million VND have attracted the most attention from customers because this is a segment of cars that is easy to buy and easy to sell. Customers who choose to buy cars at this time also often have a suitable amount of cash available, without borrowing from banks. With the billion-dollar car segment, many stores have had to sell to recover capital, even cut losses to recover capital" - Mr. Tinh said.

Not only in the Southern market but also in Hanoi, large showrooms are impatient because they have imported large volumes of goods to serve the demand during Tet, but purchasing power is not as expected.

"Even with the COVID-19 pandemic, in the past 3 years, the showroom has never been as quiet as it is now. With hundreds of cars in stock, we are very impatient as Tet is getting closer" - Ms. Nguyen Phuong Thao - Communications Director of a luxury car dealership in Nguyen Van Huong (Long Bien, Hanoi) said.

Facing much pressure, used car prices decrease

Not only that, in the context of year-end acceleration, to increase sales, many car companies have been stimulating demand for new cars by implementing a series of incentive programs, which also greatly affects the used car trading market.

The lack of customers at the end of the year has put many showrooms in a difficult situation, unable to clear their inventory. Combined with the sharp drop in car prices from dealers with many incentives, used car stores are all in a situation of breaking even or having to sell at a loss if they do not want to keep their inventory until after Tet.

Faced with that situation, many used car stores only focus on selling existing products, limiting the import of new products.

“Every year, during this month, stores usually have to continuously import new cars or else they will not have any cars to sell. This month, the market has slowed down, there are no customers, so stores rarely import cars, only customers who need money urgently sell or consign, or buy according to customers' pre-orders. The fact that stores are not interested in importing goods makes the price of used cars cheaper every day,” Mr. Tinh, Sales Manager of a used car showroom on Nguyen Van Linh Street (District 7, HCMC) analyzed.

Having had high expectations for the used car market at the end of the year, the current situation makes it difficult for showroom owners to expect a revival in the used car market as Tet approaches. However, this is also a very good opportunity for customers who are really in need of buying a car because they will be able to buy a good quality car at a good price, without the price increase like every year.