The Used Car Market Slump: A Perfect Storm of Economic Challenges and Strict Traffic Regulations
Deep discounts on used cars fail to entice buyers as economic woes and stringent traffic fines take their toll.
In previous years, the used car market would be abuzz with activity towards the end of the year. However, this year, a plethora of vehicles gather dust as prospective buyers remain elusive.
On any given day, it’s not uncommon to find barren showrooms and desolate lots at used car dealerships along An Duong Vuong Street in District 5, Ho Chi Minh City. The story is no different in other parts of the city, such as Cong Hoa Street in Tan Binh District, where rows of pre-owned vehicles await their new owners in vain.
Mr. T., a showroom owner in Tan Binh, laments, “There are days when we don’t see a single soul, and it’s not uncommon to go two to three days without any visitors. Some customers come to inquire about prices, but they don’t commit to a purchase, leaving us high and dry for over ten days.”
The situation is a stark contrast to the previous year, as Mr. Bui Thanh Hau, a used car dealer in Thu Duc City, recalls, “Last year, during the lead-up to Tet, we would sell one or two cars daily, sometimes even reaching five on busy days. But this year, we’ve gone an entire week without a single sale.”
What’s more, used car prices have taken a significant hit, with some models seeing discounts of up to 20%-30% compared to a few months ago. Ms. Van Thi Mai Hanh, owner of Auto Toan Phat in Binh Tan District, confirms this trend. Ms. Nguyen Thi Hien, who runs the Oto Hien chain in Ho Chi Minh City, echoes this sentiment, noting that prices in their system have dropped by 20% since the beginning of 2024 and are now at rock bottom. For instance, a 2020 Toyota Vios now goes for just VND 380 million, while a 2022 Toyota Veloz has been reduced from VND 590 million to VND 530 million.
With an abundance of supply and lackluster demand, dealerships are left with substantial inventories. In the past, dealers could offload purchased vehicles within one to two weeks, but now, some models linger in stock for months or even years.
Ms. Hanh attributes this phenomenon to the prevailing economic challenges and the reluctance of banks to finance purchases of used cars that are more than three years old. As a result, many potential buyers are left without the financial means to acquire a vehicle. She adds, “Previously, buying a used car had its perks, including softer prices and the avoidance of tedious paperwork and taxes associated with new car purchases. However, nowadays, buyers are apprehensive about ‘nguoi da vi pham giao thong’ [traffic violators] and seek assurances from used car owners, further complicating the situation.”
Ms. Hien sheds light on another factor influencing the market: the dual-purpose nature of used car purchases. She explains that buyers often intend to use these vehicles for both family and ride-sharing services to generate additional income. However, with the recent surge in traffic violation fines, this dual-purpose appeal has taken a hit, causing a significant dip in used car sales during the year-end period. She also points out the intense competition in the ride-sharing market, with new apps and car brands entering the fray, leading to a decline in the number of Grab and Be drivers, which, in turn, reduces the demand for used cars.
Mr. Ta Cong Tien, owner of the Cho Xe Kieu My in Binh Tan District, highlights another concern among used car dealers: the fear of unknowingly purchasing a vehicle with outstanding traffic fines. He explains that dealing with the associated paperwork and penalties can be cumbersome. Moreover, with automakers offering substantial discounts on new models to stimulate demand, the used car market faces an even more formidable challenge.
Mr. Pham Quang Thang, Sales Director of Hanoi Automobile Joint Stock Company, shares similar worries about the impact of increased traffic fines on buyer psychology, especially for novice drivers with less experience navigating the roads. He also foresees a potential rise in used car inventories as more people may look to sell their vehicles due to the mounting pressures of driving in today’s conditions.
As the year draws to a close, the used car market finds itself in a challenging predicament, caught between economic headwinds and stringent traffic regulations. Only time will tell if this perfect storm will subside or continue to cast a long shadow over the industry.
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