Second-Hand Car Business Booms Anew
Car buyers are purchasing second-hand units instead of brand new ones due to the higher excise tax slapped under the tax reform law that took effect at the start of the year.
Fitzgerald Chee, head of Buenamano – under the strategic asset management and sales of the Bank of the Philippine Islands (BPI), said there has been an increasing appetite for foreclosed motor vehicles by value-conscious buyers. According to him, the effect of excise taxes on vehicle costs has highlighted to consumers the merit of buying second-hand cars. Secondhand dealers of cars lessen the gap between the need of the consumer and the affordability of that need. BPI’s Buenamano, one of the top sellers of foreclosed assets in the country, revealed that sales of its foreclosed vehicles have grown 20 percent annually over the past five years.
Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law took effect on Jan. 1, raising the excise tax for automobiles. Under the law, a four percent tax would be imposed on brand new vehicles worth up to ₱600,000, 10 percent for those worth up to ₱1 million, 20 percent for vehicles worth up to ₱4 million, and 50 percent for automobiles valued above ₱4 million.
Based on client surveys and many inquiries received, Chee said a bigger portion of the market has realized the practicality of purchasing a second-hand car rather than a brand new one. With the demand increasing, he added the country’s third largest bank in terms of assets is poised to service this niche of the market. Additionally, the bank’s portfolio has grown over the years, with vehicles of various makes and models available for sale to first-time owners and to dealers of second-hand cars.
Chee said those looking to buy their first car but have a limited budget could do so without breaking the bank. He added second-hand cars allow owners to allocate the savings to cover additional expenses that come with owning a car, such as daily maintenance and insurance.
The latest report released by Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) and the Truck Manufacturers Association (TMA) showed that vehicle sales fell 12.5 percent to 171,352 units in the first six months
CAMPI president Rommel Gutierrez said the double-digit decline in sales was due largely to consumers’ decision to prioritize the purchase of basic goods and services as buying big-ticket items like motor vehicles is less favorable at this time due to rising inflation.