Sales of used cars likely to be flat this year


PETALING JAYA: Sales of used cars are expected to be flat this year, despite being largely unaffected by the goods and services tax (GST).

An industry observer said the decrease in car prices would encourage people to buy new cars instead of used ones.

According to Federation of Motor and Credit Companies Association of Malaysia (FMCCAM) president Datuk Tony Khor (pic), many consumers are still cautious about how the GST will affect the market.

“There will be a teething period of between six months and a year,” he said.

This is despite the fact that car prices of some models have dropped marginally since April 1 when the GST kicked in.

“The used car market is like the new car market. When prices of new cars fall, the same thing will also happen to used cars. And if that happens, it means that used car dealers will have to sell at a lower value, below the margin price,” said Khor.

Some industry observers said that around 400,000 units of used cars were sold in 2014. Khor said it was still too early to determine if used car sales would be better than last year.

He said while used car prices would be subject to the GST, these prices have, however, been placed under a “margin scheme” to avoid double taxation.

This would mean that the GST would be imposed only on the dealers based on the profit from a sale.

For instance, if a used car dealer buys a car from an individual for RM10,000 and sells it to another for RM20,000, then the GST will be imposed on the profit.

According to reports, vehicle prices are expected to drop by between 2% and 3% post-GST.

On another note, Khor said many of the FMCCAM used car dealers would be absorbing the 6% GST cost.

“They are bearing the cost, as they don’t want to disrupt the market and create confusion now,” he said, adding that many of its members would also need time to “adjust” to the new “margin scheme”.

Khor said the FMCCAM was conducting nationwide roadshows for its members to better understand the workings of the GST.