Thin payslips, high loan costs drive Kenyans off car purchase

Used cars at a yard in Mombasa. National Transport and Safety Authority directed dealers to register all unlisted vehicles in their showrooms and yards by December 16, 2024.

Photo credit: File | Nation Media Group

The volume of cars registered by Kenyans in the first nine months of the year declined by 43 percent compared to 2023, indicating the tough economic times exacerbated by the high cost of loans and reduced consumer spending.

According to data published by the Kenya National Bureau of Statistics (KNBS), Kenyans registered a total of 47,052 in the three quarters, a drop from 82,590 in the same period in 2023.

The number of units registered in the period to September last year, was the lowest since 2022, when the units fell to 57,978.

The decline in vehicle acquisition comes at a time when most Kenyans are hurting from the high cost of living, contracted payslip due to increased taxation and recently rising fuel prices.

In one of the interviews with the executive director of Federation of Kenya Employers, Jacqueline Mugo noted: “The enforcement of the housing levy and the SHIF alongside Paye, has placed an increased financial burden on both employers and employees. Our members report that this has reduced disposable incomes for workers significantly dampening consumer spending.”

Additionally, car dealers complained of the rising interest rates which affect demand as most new vehicle purchases are funded by banks.

In an interview early last year, the managing director of Isuzu reported: “Interest rates have been high, meaning most of our customers were not able to get funding.”

Notably, the cost of loans spiraled upwards in 2024 despite Central Bank of Kenya (CBK) indications to lenders to lower interest rates towards the end of the year, following cutting the base rate by 175 basis points between August and December to 11.25 percent.

The cost of loans rose from 13.98 percent in September 2023 to 16.91 percent in September 2024. Further analysis reveals, trailers dropped significantly, dropping by 72.4 percent to 1090 units from 3947 units.

Lorries which accounted for 7 percent and pickups 3.8 percent of registrations dropped by 57.5 percent and 58.6 percent respectively indicating decreased appetite in transport business.

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