More distributors eyeing used car business

The used car market in Singapore has rebounded from an all-time low three years ago

By SAMUEL EE (The Business Times, Wednesday, October 28, 2009)

More authorized car distributors are going into used car business, and they are going it mainly to tap growing demands for used cars and supplement the drop in new car sales.

Distributors have long been looking at used cars and trade-ins, but 2009 could be the first time that many will decide to take the plunge and formally establish such operations.

One example is Kah Motor. Earlier this year, the authorized Honda distributor set up its own in-house used cars section and began buying from customers trading in their vehicles.

Previously, it farmed out this service to independent dealers. “We used to allow dealers to buy them because there was no market for used cars, which were usually scrapped or exported,” says Kah Motor’s product manager Vincent Ng.

Now, however, the company has formally established a pre-owned business as an important tool to retain customers.

“To maintain customer loyalty, we only buy back Hondas imported by Kah Motor and we make sure the used car price we offer is the best in the industry,” says Mr Ng.

The used car market has rebounded from an all-time low three years ago. According to the Land Transport Authority, only 20,809 cars were transferred in 2006.

The umber has since risen – last year, 29,459 cars changed hands. And with 24,703 cars transferred in the first nine months of this year, it looks like 2009 will surpass 2008.

Mr Ng says the shrinking COE quota has contributed to the revival of the used car trade. “If a distributor is selling fewer new cars it has to find new revenue sources,” he says. “And because the smaller quota causes COE premiums to rise, there is increased demand for used Hondas.”

A new Honda Civic 1.8 currently costs $85,800. But a used 2006 model can be bought for between $55.000 and $60,000.

“A used Civic, Jazz or Odyssey is still in demand and good alternative to a cheaper Korean car,” says Mr Ng.

Another marque that recently set up a pre-owned division is Audi. On average, about 60-65 per cent of new car sales involve a trade-in, and the Audi Used Car Division accepts everything from Continental to Japanese brands.

“it is a two-prong approach to increased the resale value of Audi used cars for customers who trade in their used Audi for a new one, as well their used for a new one, as well as to offer competitive trade-in value, especially for first-time buyer of premium cars,” says Audi Singapore spokeswoman. These shopping for a Mercedes-Benz can also seek and in-house quote for trade-in. Republic Auto is the pre-owned face of exclusive Merc dealer Carriage (C&C).

Although Republic auto is said to be able to put a price on any trade-in vehicle and this aids new car sales.

One company still looking at the possibility of setting up a used car business is Tan Chong Motor Sales. The authorized Nissan distributor now depends on panel of 10 used car dealers.

One of them, Car Times, also has a “back-end tie up” to get used Nissans evaluated by Tan Chong’s workshop for warranty purpose. The company is based at Tan Chong’s Ubi premises but remains “an external party”.

“Through this tie-up, Tan Chong is studying the used car business,” says Ron Lim, general manager of Tan Chong Motor Sales.

This is because it is “not a simple business – we need to understand the nature of the business model”.

“we will see how it goes and may be in the future we may take in the vehicles ourselves. That is one possibility,” Mr Lim sys.