Used car industry set for double-digit growth

KUALA LUMPUR: The used car industry is expected to record double-digit sales growth this year, supported by an increase in online transactions, better buyer sentiment and improving economic conditions.

Chairman of the Federation of Auto and Credit Associations of Malaysia, Datuk Tony Khor, said the pandemic had led to an increase in online transactions for used cars.

“We are seeing more promotional campaigns through social media. Transactions are seamless, with some sellers also offering warranties for up to a year.

“Online platforms have also helped to better understand used vehicles and this has increased customer confidence in used cars,” he told StarBiz.

For 2022, Khor said he expects used car sales to increase to 480,000 units from around 428,000 units sold last year.

“We expect double-digit growth this year mainly thanks to online platforms which are now very active, especially since the start of the pandemic.

“Following the pandemic, people also believe it is safer to buy and own a car, rather than relying on public transport.”

Khor said around 398,000 used cars were sold in 2020.

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Additionally, Khor said the implementation of a “lemon law” in Malaysia would help boost used car sales.

“This way, the buyer will feel covered because buying a used car will be like owning a new vehicle.”

A Lemon Law allows customers to get a refund or replacement for a car purchased with a major mechanical defect.

Countries like the United States, Singapore, South Korea, China, and the Philippines have implemented the law.

In Singapore, it is incorporated into the Consumer Protection (Fair Trading) Act 2004.

Additionally, Khor said the sales tax exemption, which applies to new vehicles, has also had a direct effect on used car sales.

“The more people buy new cars, the more they will have to trade in their old vehicles.

“We hope the government will extend the exemption until the end of this year.

“We still have to deal with the Omicron virus and we haven’t fully recovered from the pandemic yet,” he said.

The vehicle sales tax exemption was announced in June 2020 as part of the Short Term Economic Stimulus Plan or Penjana.

Under the exemption, locally assembled cars are fully exempt from sales tax, while for imported cars the sales tax has been reduced from 10% to 5%.

The tax holiday was originally scheduled to last until the end of 2020. However, it has been extended until June 30, 2021; then again until the end of the year.

During the tabling of Budget 2022 last October, the government announced that the sales tax exemption would be extended once again until June 30, 2022.

The multiple extensions were mainly due to repeated closures over the past two years, which disrupted business operations and prevented car buyers from fully enjoying the benefits of the tax exemption.

In terms of new vehicle sales, total industry volume (TIV) fell 4% year-on-year to 508,911 units in 2021 as various movement restrictions caused by the Covid-19 pandemic during the year latest hampered business operations for months.

The last time annual auto sales were lower than a year ago was in 2007, when the VTI reached 487,176 units.

Despite the disastrous sales performance last year, the contraction was still less than the TIV contraction recorded in 2020, which was 12.4%. A total of 529,514 vehicles were sold in 2020.

For 2022, the Malaysian Automobile Association predicts vehicle sales will grow 18% year-on-year to 600,000 units.