UsedCars: budget impact on trade-insNew car buyers hoping to wait until July to make their purchase may be leaving themselves at a disadvantage when it comes to the actual value of their second-hand car, according to motor industry experts analysing the market after last week's Budget.
Many buyers may not realise that their car will be worth a good deal less because it will be at least six months older in July when they go to trade in.
"People should not assume they will be getting a much better deal because there is going to be a major re-alignment in prices in July and people will be trying to trade-in older cars that will be worth a lot less than they are right now," said one distributor source.
Distributors don't expect major confusion after Christmas. This is based on the logic that a lot of dealers have already completed many of their orders for January, based on previous valuations for second-hand trade-ins, and the fact second-hand cars will lower in value as we near the July deadline.
"About 95 per cent of deals involve trade-ins and much of January's business is already on dealers' books. The real issue here is the cost of changing your car and when you get lower prices for new cars in July, you will also get lower prices being offered for cars for trade-in," says Jim Cusack, deputy managing director of Toyota Ireland. "We see it as a balancing exercise. At the moment, you are getting a higher price for a trade-in but when it comes to July, you will get a lower price, but also a cheaper purchase price. But at the moment it is business as usual."
Many in the car business agree that many buyers will be seriously interested in diesel cars from now on.
"I don't think it is a matter of people asking if they will buy a new car, it is rather if that car will be a diesel because of the new costs involved," says James Brooks, managing director of Kia in Ireland. He points out that the cost of a Kia C'eed diesel will be falling by some €1,500.
"The combination of the Budget and road tax means there will be a big shift to diesel," he adds.
Cusack predicts that dealers will have a lot of work on their hands trying to explain the pricing structure to buyers. "There will be a lot of explaining to be done initially but, within a year, I think it will have worked its way through the system and everyone will be used to the changes. When price harmonisation happened in Britain a few years ago there was a similar situation but that soon settled down," Cusack says.
Ford Ireland has fielded some queries from the public about the changes, and its dealers have been busy answering questions too. "It is all a bit vague, I suppose," says marketing director with Ford Ireland, Denis McSweeney. "There are some complications, such as the fact that metallic paint can cost several different prices depending on the size of engine chosen, so what costs you X on a 1.6 car will cost you Y on a 2.0 litre car. There is a number of areas like this that need to be looked at."
He too is predicting a major switch to diesel. "People have had prejudices up to now but when they start to realise much better performance, noise levels, pollution levels and other improvements are being matched by big savings on purchase price, tax and running costs then I think they will see the logic in it. However, sometimes the market does not respond as we might expect. There is a huge degree of emotional choice involved in buying cars," Mr McSweeney says.
Even the experts are finding it hard to judge just how much second-hand cars will drop in price in July. Most in the industry warn those hardest hit will be drivers of "gas guzzlers". The move to cleaner cars has already started, and it will move faster in the coming months.
"How much would you pay for a second-hand car with high CO2 emissions at the end of next June? I think the value will drop like a stone but average cars should still be OK. It is a mixed market," says one dealer.