Second-hand car prices have increased by at least Sh100,000 amid a surge in demand that revved up sales by 10.5 per cent in the three months to March.
Official data shows that Kenyans bought 15,858 used vehicles in the first quarter of the year, compared to 14,346 units in a similar period of last year.
The rising cars appetite came in a period in which popular second-hand models like Toyota Belta (seven years old) imported from Japan increased to $7,000 (Sh721,000) from $6,000 (Sh618,000) in December excluding duty, freight and dealers margins.
The rise in demand for second-hand cars is a departure from the cut back in unit sales witnessed last year. New car sales dropped 27.3 per cent to 2, 687 units.
Dealers said the price surge was partly due to higher demand for Japanese models manufactured in 2010 as buyers raced to beat Kenya’s rule that only allows importation of cars under the age of eight years.
The weakening of the shilling against the US dollar in the review period also made imports expensive.
“There are two factors that contributed to the price increase; higher demand for 2010 cars than supply in Japan and the weakening of the shilling,” said Charles Munyori, the secretary-general of Kenya Auto Bazaar Association – a lobby group for second hand car dealers.
“We expect them to dip from this month when demands associated with eight year rule eases.”
All imported used cars must be eight-year-old or less
Kenya’s car market is dominated by low-priced second-hand imports from Japan.
The price of Nissan X-trail 2010 edition is up to $11,000 (Sh1.1 million), having shot up by about Sh200,000, according to dealers.
The Kenyan shilling traded at between Sh100 and Sh102 to the dollar last year compared to above Sh103 currently, pushing up import costs.
Overall, total car sales – used and new cars – grew 2.7 per cent to 18,545 units in the first quarter of the year, according to the Kenya National Bureau of Statistics (KNBS).
Second-hand cars comprised the bulk of the sales at 85.5 per cent while only 3,699 new cars were registered in the period.
Station wagons led the pack in sales at 11,005 units, followed by saloon cars (2,615) while vans and pickups bought in the period stood at 2,437, the KNBS data shows.
While the other vehicle segments registered growths in the first quarter of the year, Lorries (1,718), buses (302) and mini buses (89) recorded drops.
The Economic Survey 2017 shows that Kenyans cut spending on imported vehicles by Sh31.7 billion last year to Sh85.8 billion, marking the first drop in four years.
Motor dealers attributed the cutback to reduced demand for vehicles due to tax measures introduced in December 2015 that made cars below Sh1 million more expensive. The majority of Kenyans import used cars of below Sh1 million.
The Treasury, however, later in June last year abandoned the flat rate duty of Sh200,000 for vehicles older than three years and Sh150,000 for newer ones introduced in December, in favour of the previous 20 per cent levy of the car’s value. But the damage had already been done.