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PR Newswire
25-09-2010, 01:08 PM
My opinion is that whether used car or new car, it's still very expensive ni this small island of ours.....
Sep 25, 2010
Used cars in fast sales lane
Second-hand car sales overtake new car sales on the back of high new car prices, COE premiums
By christopher tan, senior correspondent
Used cars might not have the sheen and the smell of new leather but, for the first time in nearly 10 years, secondhand sales have overtaken those of new models.
In the January-August period, more than 35,000 pre-owned cars changed hands, versus 30,780 new cars.
More buyers have been driven to consider second-hand after a drastically smaller COE supply led to higher COE premiums and prices of new cars.
According to Land Transport Authority records, the last time used car sales exceeded new car registrations was in 2001. For all the other years in-between, new car sales have routinely accelerated past those of used cars - sometimes by more than five times.
But with the supply of COEs cut to less than half of that in the last two years and with premiums doubling - with no relief in sight in the near term - used car sales are likely to continue pulling ahead in the next few years.
This trend has prompted the big boys - authorised new car agents - to either move into the pre-owned turf, shift an existing second-hand business a gear higher or re-enter the used car trade to make up for falling sales of new vehicles.
They include agents for Audi, BMW, Ferrari, Mercedes-Benz, Kia, Porsche, Rolls-Royce, Opel, Mini and Honda.
Their trump card is that the big boys have the name recognition, infrastructure and expertise. Carrots such as warranty, spare parts and well-equipped workshops help lubricate sales too.
Most used cars sold by authorised agents come with a minimum warranty of one year. This is one up on the old-time second-hand dealers which offer warranties of six to 12 months, if at all.
Which is why used cars from authorised agents can cost 5 to 10 per cent more.
Says Audi agent Premium Automobiles' chief operating officer, Mr Marc Singleton: 'We do a lot of work on the cars, such as giving them a 100-point check- up and sprucing them up, so I'd like to think we can get a bit more for them.'
Sales at Premium's used car division, Audi Approved Plus, average 25 to 30 cars a month. 'We expect it to grow and contribute more to revenue,' Mr Singleton says of the year-old venture housed in a dedicated showroom in Kung Chong Road.
Entrepreneur Karsono Kwee is equally upbeat. His Eurokars Pre-Owned has delivered about 150 cars, mostly Porsches, since it started in April last year.
'So far, it's been profitable, I'm quite happy,' he says. From three showroom units at the Alexcier in Alexandra Road, the business has grown to five.
Besides handling used cars from his franchises (Porsche, Rolls-Royce, Mini, Saab and Opel), his outfit sells other makes too.
While business models differ from one player to the next, all of them have direct equity stakes in their second-hand businesses. They have either devoted sections of existing showrooms to run the second-hand operations or set up separate facilities elsewhere.
Typically, a company will keep the choiciest trade-in vehicles for themselves, with the rest sold wholesale to traditional used car traders.
Toyota agent Borneo Motors will be the latest to hop on the bandwagon, in November, though it will not be its first attempt.
In 1995, it started a used vehicle unit but closed it three years later after new car prices softened in the wake of tax cuts and growing COE supplies.
Its used car operation will be based in its Leng Kee Road showroom and focus on Toyota and Lexus cars.
Borneo managing director Koh Ching Hong says things will be different this time: 'We will be modest in our approach. We will start with baby steps. We're going to be selective in our choice of vehicles in terms of model, age, mileage and service history.'
Honda agent Kah Motor's used car venture is not its first either. It quit the scene around the same time as Borneo in the late-1990s, but made a re-entry two years ago.
Like Borneo, it is keeping the operation modest for now. It sells only used Hondas and only those sold originally by Kah.
Product manager Vincent Ng says it sells about a dozen cars a month and believes the business will grow.
The caution with which the two big players are re-entering the used car trade underlines the difficult nature of the business that has kept many away.
Holding stock is costly because used cars are already registered for use and taxes make each vehicle at least double the holding cost of a new pre-registered equivalent.
There is depreciation cost and values can fluctuate too. A drop in COE premiums could wipe out hundreds of thousands of dollars from a used car inventory overnight if the cars were bought when COE prices were higher.
New cars do not pose such a risk as taxes have not been levied yet.
Which is perhaps why BMW agent Performance Motors chose to partner long- time used-vehicle trader Tanglin Cars to set up Performance Premium Selection.
While the joint venture dates back to 2004, it picked up pace only in May this year, when it moved into its dedicated showroom in Kampong Arang.
Performance Premium Selection's managing director Foo Tee Boon describes the partnership as 'a good mix of corporate and entrepreneurial skills'.
The set-up turns over 200-plus cars a month. The volume is a blend of European cars, which it sells to end-users, and other makes, which it sells wholesale to traditional used car traders.
Motor traders say a used car operation makes sense for authorised agents because the business offers synergy and, if executed well, an additional revenue stream.
Besides helping the authorised agents sell more cars, used car operations offer other benefits.
Big boys enter pre-owned turf
Mr Foo says the used car venture helps support Performance Motors' new car sales by taking in trade-in cars. And it supports its workshop business because many of the used BMWs it sells are under warranty - as are most used cars sold by authorised agents.
This evidently is a selling point. Senior sales manager Michael Soh, who bought an 18-month-old Audi A4 1.8T from Audi agent Premium Automobiles, said the deciding factor was 'the assurance that the car is in good condition'.
At about $130,000 (versus $150,000 for a new car then), it was pricier than some equivalent cars sold by other used car dealers, but 'the difference was not too great', he says.
'It's been close to a year now and I'm happy with the car,' the 53-year-old adds.
Businessman Sanjay Samnani, 39, says he would go to an authorised agent the next time he shops for a used car.
He recently bought a second-hand Subaru that he suspects was tampered with.
'The trip meter showed 41,000km. But when I sent it to the agent for servicing, I was told that it had already clocked 53,000km in 2008,' he recalls.
Meanwhile, traditional used car traders, which number about 300, are feeling the heat from the new-found competition.
Mr Raymond Tang, secretary of the Singapore Vehicle Traders Association, a body of used car traders and parallel importers, says the emerging trend will 'definitely have an impact'.
He says: 'There will be far fewer cars available and we will find it harder and harder to find cars for ourselves.'
Nevertheless, he notes that the used car business on the whole 'will be stable for the next two years at least'. Beyond that, COE supply may begin to rise once again, a development that could dampen the demand for second-hand rides.
Even so, Mr Singleton of Premium Automobiles reckons that used car divisions will become a prominent part of the motor business.
'In Britain or the United States, new car dealerships can't survive without a used car business. New car margins are just too thin,' he says.
And on that score, things are headed that way as more carmakers such as Mercedes-Benz and Audi assume the role of importer and distributor in Singapore.
The move has relegated local players to become dealers, which typically have thinner profit margins than distributors.
christan@sph.com.sg
Sep 25, 2010
Used cars in fast sales lane
Second-hand car sales overtake new car sales on the back of high new car prices, COE premiums
By christopher tan, senior correspondent
Used cars might not have the sheen and the smell of new leather but, for the first time in nearly 10 years, secondhand sales have overtaken those of new models.
In the January-August period, more than 35,000 pre-owned cars changed hands, versus 30,780 new cars.
More buyers have been driven to consider second-hand after a drastically smaller COE supply led to higher COE premiums and prices of new cars.
According to Land Transport Authority records, the last time used car sales exceeded new car registrations was in 2001. For all the other years in-between, new car sales have routinely accelerated past those of used cars - sometimes by more than five times.
But with the supply of COEs cut to less than half of that in the last two years and with premiums doubling - with no relief in sight in the near term - used car sales are likely to continue pulling ahead in the next few years.
This trend has prompted the big boys - authorised new car agents - to either move into the pre-owned turf, shift an existing second-hand business a gear higher or re-enter the used car trade to make up for falling sales of new vehicles.
They include agents for Audi, BMW, Ferrari, Mercedes-Benz, Kia, Porsche, Rolls-Royce, Opel, Mini and Honda.
Their trump card is that the big boys have the name recognition, infrastructure and expertise. Carrots such as warranty, spare parts and well-equipped workshops help lubricate sales too.
Most used cars sold by authorised agents come with a minimum warranty of one year. This is one up on the old-time second-hand dealers which offer warranties of six to 12 months, if at all.
Which is why used cars from authorised agents can cost 5 to 10 per cent more.
Says Audi agent Premium Automobiles' chief operating officer, Mr Marc Singleton: 'We do a lot of work on the cars, such as giving them a 100-point check- up and sprucing them up, so I'd like to think we can get a bit more for them.'
Sales at Premium's used car division, Audi Approved Plus, average 25 to 30 cars a month. 'We expect it to grow and contribute more to revenue,' Mr Singleton says of the year-old venture housed in a dedicated showroom in Kung Chong Road.
Entrepreneur Karsono Kwee is equally upbeat. His Eurokars Pre-Owned has delivered about 150 cars, mostly Porsches, since it started in April last year.
'So far, it's been profitable, I'm quite happy,' he says. From three showroom units at the Alexcier in Alexandra Road, the business has grown to five.
Besides handling used cars from his franchises (Porsche, Rolls-Royce, Mini, Saab and Opel), his outfit sells other makes too.
While business models differ from one player to the next, all of them have direct equity stakes in their second-hand businesses. They have either devoted sections of existing showrooms to run the second-hand operations or set up separate facilities elsewhere.
Typically, a company will keep the choiciest trade-in vehicles for themselves, with the rest sold wholesale to traditional used car traders.
Toyota agent Borneo Motors will be the latest to hop on the bandwagon, in November, though it will not be its first attempt.
In 1995, it started a used vehicle unit but closed it three years later after new car prices softened in the wake of tax cuts and growing COE supplies.
Its used car operation will be based in its Leng Kee Road showroom and focus on Toyota and Lexus cars.
Borneo managing director Koh Ching Hong says things will be different this time: 'We will be modest in our approach. We will start with baby steps. We're going to be selective in our choice of vehicles in terms of model, age, mileage and service history.'
Honda agent Kah Motor's used car venture is not its first either. It quit the scene around the same time as Borneo in the late-1990s, but made a re-entry two years ago.
Like Borneo, it is keeping the operation modest for now. It sells only used Hondas and only those sold originally by Kah.
Product manager Vincent Ng says it sells about a dozen cars a month and believes the business will grow.
The caution with which the two big players are re-entering the used car trade underlines the difficult nature of the business that has kept many away.
Holding stock is costly because used cars are already registered for use and taxes make each vehicle at least double the holding cost of a new pre-registered equivalent.
There is depreciation cost and values can fluctuate too. A drop in COE premiums could wipe out hundreds of thousands of dollars from a used car inventory overnight if the cars were bought when COE prices were higher.
New cars do not pose such a risk as taxes have not been levied yet.
Which is perhaps why BMW agent Performance Motors chose to partner long- time used-vehicle trader Tanglin Cars to set up Performance Premium Selection.
While the joint venture dates back to 2004, it picked up pace only in May this year, when it moved into its dedicated showroom in Kampong Arang.
Performance Premium Selection's managing director Foo Tee Boon describes the partnership as 'a good mix of corporate and entrepreneurial skills'.
The set-up turns over 200-plus cars a month. The volume is a blend of European cars, which it sells to end-users, and other makes, which it sells wholesale to traditional used car traders.
Motor traders say a used car operation makes sense for authorised agents because the business offers synergy and, if executed well, an additional revenue stream.
Besides helping the authorised agents sell more cars, used car operations offer other benefits.
Big boys enter pre-owned turf
Mr Foo says the used car venture helps support Performance Motors' new car sales by taking in trade-in cars. And it supports its workshop business because many of the used BMWs it sells are under warranty - as are most used cars sold by authorised agents.
This evidently is a selling point. Senior sales manager Michael Soh, who bought an 18-month-old Audi A4 1.8T from Audi agent Premium Automobiles, said the deciding factor was 'the assurance that the car is in good condition'.
At about $130,000 (versus $150,000 for a new car then), it was pricier than some equivalent cars sold by other used car dealers, but 'the difference was not too great', he says.
'It's been close to a year now and I'm happy with the car,' the 53-year-old adds.
Businessman Sanjay Samnani, 39, says he would go to an authorised agent the next time he shops for a used car.
He recently bought a second-hand Subaru that he suspects was tampered with.
'The trip meter showed 41,000km. But when I sent it to the agent for servicing, I was told that it had already clocked 53,000km in 2008,' he recalls.
Meanwhile, traditional used car traders, which number about 300, are feeling the heat from the new-found competition.
Mr Raymond Tang, secretary of the Singapore Vehicle Traders Association, a body of used car traders and parallel importers, says the emerging trend will 'definitely have an impact'.
He says: 'There will be far fewer cars available and we will find it harder and harder to find cars for ourselves.'
Nevertheless, he notes that the used car business on the whole 'will be stable for the next two years at least'. Beyond that, COE supply may begin to rise once again, a development that could dampen the demand for second-hand rides.
Even so, Mr Singleton of Premium Automobiles reckons that used car divisions will become a prominent part of the motor business.
'In Britain or the United States, new car dealerships can't survive without a used car business. New car margins are just too thin,' he says.
And on that score, things are headed that way as more carmakers such as Mercedes-Benz and Audi assume the role of importer and distributor in Singapore.
The move has relegated local players to become dealers, which typically have thinner profit margins than distributors.
christan@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/