By Ujeena Rana
Next to buying a home comes buying a vehicle on most people’s wish list. Who does not love the look, feel and smell of a new vehicle? If you are placed in the middle class hierarchy, owning a car is synonymous to functionality, prestige, need and giving in to your children’s demand. And if you don’t want to be burdened with EMIs, you browse through lower priced range of new and used cars. If financial mediocrity isn’t your problem then buying a car is all about luxury, fashion statement and adding one more set of wheels to the repertoire.
Nepal does not have the provision of checking and certifying the state of pre owned cars yet. There is no government or non-government agency that does the job. Therefore, the notion of certified pre-owned car does not exist in Nepal. The only option left is buying a used car.
There are several used car showrooms and online platforms that cater to this segment. Hamrobazaar.com is a free social platform for buying and selling of products. They have on offer other items as well but a major chunk of their online classified portal space is occupied by transactions pertaining to buying and selling of cars. Showrooms also upload brand new cars but used cars section is mostly viewed. “Haamrobazaar enjoys one of the top five online traffic in Nepal,” announces Prabal Saakha, Cofounder of the portal. That is a testament to the growing dependence of consumers on online shopping—including shopping for cars.
“Auto loan for used vehicle can be achieved against 50% of the value
of vehicle at the time of valuation and additional collateral of land and/or building with minimum 50% distress value covering the loan size for the commercial vehicle”
NADA Auto Show 2017 is an eagerly anticipated yearly event crowded by auto enthusiasts. A majority of these attendees already own private vehicles. However, a handful of the products on display and their features will stay with the auto show visitors even after they leave the venue. Those who give in to the lure of the new models, will sell or avail of the exchange offer and drive home in a brand new vehicle.
It is safe to say that there is a huge market for second hand automobiles in Nepal. Sadhu Ram Dhakal, Senior Sales Officer at Nepal Wheels says, “In a month, we entertain approximately 100 buyers.” Not everyone can afford to buy a new car. “Our government considers four wheels as a luxury and not a necessity, therefore we are one of the highest tax-paying nations in the world when it comes to importing automobiles and therefore when car dealers in Nepal sell, it comes at a whooping price tag,” comments Saakha.
Once a vehicle changes hands, it becomes highly depreciated. There are risk factors attached to investing in a second-hand vehicle though. But sometimes you can strike a great deal. Used cars are not always old cars, sometimes people sell brand new cars for various personal reasons. Whatever the age of the car, it is always advisable to make the purchase after thorough check-up by a trusted mechanic.
“A brand new car that was bought at 30 lakhs will often sell at Rs.20-22 lakhs after a year or two of its use,” states Dhakal. The best car period for car sales is between August and November. Hatchbacks and SUVs are high in demand.
Few banks provide auto loan for used cars. The prerequisites, however, differ from bank to bank. According to the information provided by Nabil Bank, it facilitates a loan amount of up to Rs 2 million for used vehicles, whether private or commercial. The loan tenure is four years but the age of the vehicle should not exceed seven years at the time of loan maturity. Auto loan for used vehicle can be achieved against 50% of the value of vehicle at the time of valuation and additional collateral of land and/or building with minimum 50% distress value covering the loan size for the commercial vehicle. Further, the bank requires at least two valuations of the vehicle, one from the bank’s authorised valuator.
In the case of Siddhartha Bank, it does not finance vehicles older than four years. Moreover, such used/second hand vehicles must be revaluated by the authorised dealer/workshops or by the bank’s authorised valuator. The loan ceiling is also limited by the drawing power as defined by NRB (presently maximum 50% of the value of the vehicle). In case of financing for second hand vehicle, the last installment of the loan should be repaid before the vehicle is seven years old. For loans secured by additional collateral in the form of land or land and building by at least 75% of fair market value as valued by bank’s authorized valuator, the payback tenure may be extended up to nine years.
Jason Baidya purchased a Nissan Teana 2008 for 45 lakhs. The original price of which is approximately 1 crore 16 lakhs. The vehicle had run only 11,000 kms. He believes that the showroom value of new vehicles is exorbitantly high. “If it has not run enough, has not met with any accident, is clean and comfortable, and above all, you get it for 30-40% less value, then why not opt for used cars,” Baidya shares. He is a regular customer at Dream Motor Cars. “Most of our customers buy used cars from us and exchange it with an updated one, therefore mostly it is the same group of people we do business with,” informs Pradip Khadka, sales staff. According to him, Japanese vehicles are preferred over others and Suzuki and Hyundai have the highest resell value.
There are various reasons why people sell their vehicles:
Emergency: when they are in the dire need of money
Upgrade of model
Affordability: Some people can afford to drive a new model every year therefore sell their vehicle even if it is barely a few months’ old.
Some borrowers can’t pay back their loan; therefore, banks initiate collecting the amount by auctioning the automobile
Taste: Initially people buy a car under the influence of others, but later realise that it is not made for them
Top reasons why people buy used vehicles:
If a driver is relatively new and doesn’t want the new car to get damaged, but mostly it is the price factor that dictates the used car business.