Personal cars registration hits 20-month high in September on lower excise tax
Imported cars at a Mombasa port yard. Reduction of interest rates is expected to drive up credit expansion, especially for assets such as vehicles. PHOTO | FILE
What you need to know:
The number of station wagon and saloon cars registered in September was 7,168 compared to 3,555 in August and 4,913 a month earlier.
In June the government scrapped a flat-rate tax formula introduced in December that had pushed up the price of small cars.
Registration of personal vehicles more than doubled in September hitting a 20-month peak following a change in excise tax and a rush to beat an age-limit deadline.
Data from the Kenya National Bureau of Statistics (KNBS) shows the number of station wagon and saloon cars registered in September was 7,168 compared to 3,555 in August and 4,913 a month earlier.
In June the government scrapped a flat-rate tax formula introduced in December that had pushed up the price of small cars, while pulling down the cost of fuel guzzlers in a move perceived to favour the rich.
The government was charging a flat rate of Sh200,000 on vehicles older than three years and Sh150,000 for newer ones.
“People had stopped buying those small cars,” said Charles Munyori, the secretary-general of the Kenya Auto Bazaar Association. Excise duty is currently levied at 20 per cent of the value of the car, which favours importation of cars valued at less than Sh1 million.
A used vehicle worth Sh800,000 is charged a levy of about Sh160,000 as opposed to the previous Sh200,000.
Discarding the seven-month old formula, however, saw prices of cars valued above Sh1 million rise.
A vehicle valued at Sh4 million, for example, will attract a Sh800,000 fee compared to the previous Sh150,000 to Sh200,000 based on age.
Mr Munyori said the rise in car registration was also driven by traders’ rush to import cars manufactured in 2009 before they are locked out by the eight-year regulatory requirement.
Kenya does not allow importation of cars older than eight years.
“The selling price in Japan is also cheaper because they want to get rid of the stock,” said Mr Munyori.
Japan is the largest source of second-hand cars for the Kenyan market.
Kenyans prefer station wagons over saloons owing to their larger carrying capacity, which has seen some owners convert them into public service vehicles.
In September, there were 5,678 station wagons sold compared to 1,490 saloons.
The total number of new vehicle registrations in September rose by 1.3 per cent compared to August following a sharp decline in the number of motorcycle imports over the same period.
The number of newly registered motorcycles dropped to 7,952 from 11,399 in August.
A decline in interest rates in September is expected to further drive up vehicle sales in the country. A law capping interest rates at four percentage points above the Central Bank Rate (CBR) came into effect mid-September, reducing the cost of loans from highs of 24 per cent to 14 per cent.
Reduction of interest rates is expected to drive up credit expansion in the country, especially for asset financing such as motor vehicles.
Under the new rate a borrower will pay about Sh18,614 per month to finance a Sh800,000 car compared to Sh23,014 at the rate of 24 per cent.
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Note: The results are not exact but very close to the actual.
