Looking to get a used car in Nigeria?
As you have noticed, the price of used cars have skyrocketed in the last few months. This is not good news for the average Nigerian as cars in the country have tripled.
This increase in the price is due to high duty, clearing and processing fees, freight fees, increased fx rates, security insurgencies, an unfriendly port environment, etc.
A post-COVID survey by The Guardian Newspaper shows the prices of some of Nigeria’s most popular vehicles before and after the pre and post-pandemic. Pre-pandemic shows Toyota Corolla 2009-2010 was NGN 2.4 million and post-pandemic the car sold for NGN 3 million. As of today, the price of a US-used Corolla 2009-2010 goes for NGN 4 million.
This is an example of one vehicle, the list goes on because of different factors that have affected the change. We have put together a list of some factors that have skyrocketed the price of used cars in Nigeria.
Why Has the Price of Used Cars Increased?
1. Longer Wait Times for Fewer Vehicles in the US
The United States is a major source of used vehicles in West Africa. The COVID-19 pandemic disrupted the supply chain of a log of essential brand-new car parts. Ports and factories around the world were shut down and production slowed due to the pandemic.
This made it difficult for automakers to source parts for new vehicles and ship them to other countries. The pandemic also led to a semiconductor chip shortage, which hit not only the auto industry but other industries like electronics and other industries that use semiconductor chips. This led to an increased wait time for new vehicles.
According to Fortune, semiconductor chip shortage is the central piece for driving the supply of new vehicles down.
Also, fewer people are buying new cars due to the harsh economy and inflation. This means people are holding on to their vehicles longer. The reports that the prices of new vehicles rose by 1% while used car prices rose by 1.8% within the same period (May to April).
2. Increased Demand For Vehicles in the US
The COVID-19 pandemic affected the buying behavior of consumers. Since then, demand for personal vehicles has steadily been on the rise as many people are no longer comfortable taking public transport….. Since the factories are yet to fully get back to regular production and cover the semiconductor chips shortage for new vehicles people have gradually opted for used vehicles.
Also due in part to the impact on global economies that has seen spending power reduced. In trying to save money and still buy the exact vehicles wanted, global buyers are increasingly settling for used versions of what they want.
Other prospective buyers are postponing buying new vehicles because of the low supply and increased demand increases the price by switching to used vehicles as an alternative.
Buyers from Nigeria will be competing with the already saturated US market in the demand for used vehicles and the competition is no lesser at online wholesale vehicle auctions also. The higher the competition for a vehicle, the higher the auction sale price.
3. Dollar Rate Increase
A huge percentage of vehicles imported into Nigeria come from the US, Europe, and the middle east, and payment for vehicles bought in these regions is universally the U.S Dollar.
Due to the widening gap in the exchange rate of Naira to Dollars, stifling Central Bank of Nigeria policies, as well as the scarcity of U.S dollars available in the country due to high demand, importing vehicles into Nigeria has been a hassle for many car businesses.
To avoid losses, businesses have hiked up their prices to accommodate the increasing cost of purchase as a result of the increased naira to dollar rates and scarcity of foreign exchange to pay for purchases in online vehicle auctions. A dollar to naira as of 2015 was NGN 197 now at the time of this post is NGN 620 at the black market rate.
This makes buying a used vehicle more expensive for the average Nigerian to afford.
4. New Customs Duty Policy
In January 2021 the Nigerian government revised import duty tariffs for transport vehicles from 35% to 10%. This was meant to be a policy to ease the impact of high naira to dollar exchange rates. However, this changed in June 2021 when terminal operators announced a 50% increase in handling charges.
In addition, the impact the was canceled entirely thanks to an additional 15% NAC levy introduced by Nigeria Customs that took the cumulative duty paid on vehicles right back to 35%, as if nothing changed
A more recent change in duty payment formula, the E Valuation, and the minimum duty benchmark year of 2013 led to increased duty for the most popular year range of vehicles bought by Nigerians, 2010 vehicles below.
According to This Day, valuation duties on vehicles have increased by 300%. A Toyota Corolla in February paid NGN 550,000 as clearing duty but now pays almost NGN 1.8 million. These charges are outside of other traditional terminal charges. The increased duty charges have impacted the price of used cars in the country.
There is no telling when the auto market will stabilize. With inflation, increased gas prices, the war in Ukraine, COVID-19, and many other things going on around the world. We cannot be certain how things will turn out in the future. Although we all hope for the best.
Vehicles, for Nigerians, are a luxury and lifestyle item that every Nigerian yearns for. As such there will always be a demand. Whether foreign-used or locally-used, Nigerians will always save up income or take loans to buy cars.
The best way out of this is to endeavor to get good deals at wholesale auctions such that though one won’t necessarily avoid the increased cost, you can minimize the overall cost of getting your dream vehicle.
Buying a used car may be expensive but not impossible to land good deals!
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