Why cars don’t depreciate as fast in Pakistan

[waheed.arshad0]

Salaam all. Newbie here.
Actually visiting Pakistan right now. Born and bred in UK.

Something I can’t get my head round is how some cats don’t lose value but can increase in value.

Examples were given by my friend where they bought a brand new Corolla Altus for 22 lake and we’re then offered 24.5 lake for it.

Similarly they bought a vaganor and sold it 2 months later for an extra 1 lakh.

It’s beyond belief because in the UK, once you drive a car out of the showroom it’s effectivrly lost some of its value. Obviously varies by make/model/trim but any car that even doesn’t get used and just sits there will depreciate.

Perhaps the Pakistani examples I give are unique and rare but I’m lead to believe it’s possible to buy a car, keep it for one month or so then sell it for roughly the same amount quite easily

Somebody please explain. Quite interested to know

[Luke_mani]

1. Cars are a luxury in Pakistan, not a necessity.
2. Increased wait times to get a new car.
3. Black money involved; resulting in investors booking cars or people opting for registered cars to avoid tax issues.
4. Demand and supply
5. The cartelization of the industry

[waheed.arshad0]

Thanks, I was having a nosey in the classified section and some the asking prices for a 10 year old model were not too far off price advertised by Toyota Indus for brand new one.

The waiting time might explain why some people don’t just walk into a showroom and pay list price. Must be a lot of money floating around if they would rather pay an extra few lakhs to avoid waiting a couple of months

[Luke_mani]

There is a lot of liquidity - people prefer cash as opposed to keeping money in banks. Cars are a very safe investment.

[mehran]

People are poor here and most cannot afford a new car. So used second hand cars, even if decades old, still command a good price. In rich countries (Europe, USA, Canada, Japan etc) everyone can afford a new car and very few want to buy a used car. Therefore used car prices are very low, so that at least someone is tempted by the low price and takes it off the owner's hands.

[waheed.arshad0]

Thanks, I’m very tempted now. Not to buy as an investment but to buy and use during a future visit with the hope I can sell shortly before leaving with only a few thousand loss.

[aliaamar1101]

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[capsat]

Buying a vehicle in Pakistan is Premium Capital investment., depreciation happens when leasing services are highly active and the mindset of people is inclined to built financial credibility.

Depreciation is directly proportional to the Capital [ own resources ] amount invested by the buyer.,

a survey conducted by Orix during 2013-14 suggested leasing terms be relaxed, but documentation involved in the process shall be under tough scrutiny.

a person with cnic address of Okara Punjab working at a software house in Swabi KPK shall not be eligible for a vehicle lease under his own name, unless the permanent address is of same city - province as the city of residency / employment. His employer can lease and allocate a vehicle under his salary deduction and directly transfer the vehicle at end of lease period.

the suggestion was adopted in principal but not practiced thus leasing is considered failure., as leased vehicles goes missing and leasee untraceable

[khuram2703]

Adding to it the infaltion against dollar and pound is also major contributor along with....

[driver.pk2]

Demand and Supply is the main cause behind this

[waheed.arshad0]

Thanks all. Yes seems to be a lot of factors.

UK market there is a fresh supply (many cases over supply) of new vehicles. Heck we we build a lot of vehicles for domestic and export market.

There’s relatively cheap but definitely easy access to credit. You can walk in to some places and drive out with a new car worth 3 times your annual salary in about an hour with little or no deposit.

People finance new cars with loans or lease.

I, for example, have leased a brand new car and will give it back this September after 2 years. That’s a 2 year car going back on open market (via auction) to be sold and now me searching for another lease of new car.

[unknown_one]

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[waheed.arshad0]

Yes, oddly the price of old cars is high, whereas the cost of popular cars brand new is exceptionally cheap when compared against the equivalent model and a favourable exchange rate.

A new Corolla GLi is about 23 lac on the road.
At 160rs/£ that works out at about £13,000. Although we don’t have a directly equivalent saloon model Corolla, that is a very very cheap price for new car.

[mehran]

Unfortunately even though £13,000 may be low for a new sedan but very very few people here have that kind of money. Out of 210 million people only about 250,000 can afford a new car every year.

Compare that with UK. Population 65 million and 2.7 million new cars sold in 2016. Ten times the number of cars sold in Pakistan. So definitely no one wants to buy a used car in UK.

[unknown_one]

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[waheed.arshad0]

There’s definitely a buoyant market for 2nd hand cars. It’s just considerably cheaper than the original selling price when new.

Not uncommon for car to loose 20-30% after first 2-3 years.

The figure you quoted for new car sales may also include large fleet purchases such as company cars for employees, hire/rental companies and lease companies. Not that many people go out and buy a brand new car from showroom and pay cash. Usually financed with loan.

So it’s not a case of Brits having a lot of money. They just have easy access to cash.

In my limited experience I would judge:
Brand new car - cheaper in Pakistan (local models)
2nd hand car - cheaper in UK

[mehran]

What you say might be quite true. But please keep in mind that the quality and content of a UK spec car would be quite higher than a PKDM car. Otherwise your opinion is logical.

[qwertz]

In civilized world, common man believes in 'honesty is the best policy'. Here if you start leasing like that people will simply take the car away and vanish. The amount and quality of trust is different between two cultures.

[ahmadmuj1988]

A simple reason for low apparent depreciation is the increased replacement value Market value of a car is based on the price of a new car of the same model as a benchmark. For example, I have been in Australia for 11 years. When I first came here in 2007, a Corolla was AU$22,000. A new Corolla is still AU$22,000 here, even though the exchange rate has changed a lot over that time. But because of competition due to open imports, nobody can cartelise and fix prices.

If I go to buy a used car, I know that the price of the equivalent new car is stable. A 5-year old Corolla will be depreciated based on the fact that it was 5 years ago valued at AU$22,000 and if I choose to buy a new one today, it is still the same price.

In Pakistan, due to the oligopoly in our industry, lack of competition because of stupid amounts of taxes on imports, and depreciation of the rupee means the new equivalent replacement cars become more expensive over time. A Corolla XLi was PKR 1.2M in 2010. The same car is now PKR 2M. If I go to buy a second-hand car, the effective price in the secondary market is still a fraction of the replacement car price, except the base is higher. My sister's GLi was bought for 900k...now they are getting offers for 1100K which is still about half of what a GLi would now cost ex-showroom...

[ahmadmuj1988]

Brand new car - cheaper in Pakistan (local models)
2nd hand car - cheaper in UK

New ones would also be cheaper in UK when you adjust for purchase power parity...Pakistan's purchase parity is about 2.3, so spending US$1 from Pakistani income would be the same as spending US$2.3 in the USA and so on...