Used car shortage alert! Second hand car dealers are running low on stock to sell

We will soon be facing a double whammy as we're not just facing a shortage of new cars, but used car dealers are also reportedly running low on stock to sell. The shortage of used cars is attributed to the slow delivery of new cars caused by the global shortage of semiconductor chips.

Due to the lack of parts, new car buyers are made to wait up to four months in some cases, causing many to hold on to their old cars. 

Federation of Motor and Credit Companies Association of Malaysia (FMCCAM) president Datuk Tony Khor revealed to The Star that there is a backlog of more than 80,000 customers who have booked new vehicles for up to four months but still have not received their cars.

As they are unable to collect their new cars, they hold on to their old cars which gradually led to the lack of supply in the used car market.

Since the country’s economy restarted after the Covid-19 pandemic, the used car business has been booming. Khor added that demand for used cars shot up 8 percent in the first quarter of 2022 and the price also rose about 5 percent for cars less than five years of usage.

Khor also said that when people usually buy new cars, 60 to 67 percent will trade in their existing cars. However, this is not happening anymore.

Also read: Low-mileage used cars are safer to buy than high-mileage ones? Not necessarily

“The supply shortage has led to a price hike too, as demand has increased. But there is no significant price increase in the consumer market as it’s currently being absorbed by car dealers, so we are getting a lesser profit margin,” he said.

Khor also attributed the increase in demand to the practice of promoting used cars on online platforms which have bolstered customer confidence in used cars.

“Transactions are transparent, with some sellers also providing guarantees and warranties for up to a year,” he added.

Another reason for the surge in demand for used cars is also due to the special Employees Provident Fund (EPF) withdrawal in April.

Also read: Largest in SEA, Carsome Certified Lab refurbishes 2,000 cars monthly

Echoing the improvement in used car demand is Alan Cheah, country general manager of car e-commerce platform Carsome Certified Malaysia.

“With longer waiting periods for new cars, pre-owned cars have become an attractive option as they are more financially viable.

“While tax exemption constitutes one of the attributed factors for customers selling their cars as they seek to buy new cars, there are a few other reasons, such as the new work-from-home routine, which doesn’t require them to drive as often or own so many cars at once,” he said.

On the subject of FMCCAM and MAA’s request to the government to extend the sales tax exemption past the 30-June-2022 deadline, Cheah agreed with it.

“A tax exemption extension will increase the supply of newer used cars in the market. This, in turn, widens our already-large selection of quality-assured pre-owned cars, which allows us to continue to cater to customers’ needs.

“On the same note, if the supply of new cars continues to be delayed and customers are looking for immediate mobility solutions, they are likely to turn to used cars to meet their needs,” he said.

Also read: Carsome PJ Automall opens; company's largest experience centre awaits you with lots of cars and gifts