By Queen Munguti
Car dealers in Kenya have implemented strategies that so as to keep up demand of vehicles such as Honda Fit whose price has significantly increased by more than Sh200,000 this year due to the rise in import duty from 20 per cent to 43 three per cent as of February 2018.
In the first quarter of this year, car sales in the country were negative losing 1.9 per cent according to the latest report by the Kenya Motors Industry.
In this, Maridady Motors, dealers in new and used cars, located along Kiambu road now offers asset financing to its clients. It gets financing from a bank on behalf of a client allowing it to import the car for the client.
“We value vehicles that we already have in our showroom. If a client would like to buy a Nissan X-Trail which can go for Sh2.5m, for example, but they do not have enough money to buy the car, we use the X-Trail we have in our showroom or another car worth the same amount to secure a loan from the bank. We use the money to import the car and once it arrives at the Mombasa Port, we handle the clearing and apply for a change of unit such that we get back the log book and other documentation of our car and we give the bank the log book and documentation of the new car,” said Churchill, Maridady Supervisor.
Besides, asset financing, Maridady has also introduced lay-by. Its clients sign a contract for a period of one year and in that period they are able to save with the company until they complete the car payment.
Usually, the customer makes the first deposit of 10 per cent of the value of the vehicle, the client decides on how much deposit they would like to pay every month so that within a year they have completed the payment of the car.
“However, they are times where we have considerations. We have limited it for one year because the tax keeps on changing, so we do not want a case where we say three years and tax affects the import process. We have clients that come and ask for one and a half year period and we look at the type of vehicle and if it is one that is not commonly affected by taxes, we consider the request,” said Churchill.
Additionally, if by one year the client has not completed the payments, the company analyses the balance left and reworks the contract according to the current market value of the car.
For Ineax Motors, located in Kilimani, Nairobi, it is working on introducing in-house financing in a bid to allow customers to get a car loan. The dealership has seen a decrease in the purchase of Honda Fit which was popular with Uber drivers due to the increase in price from Sh650,000 to Sh850,000.
“We are still working on how to implement it; for banks, they have the mechanisms and factors to find out who is creditworthy, who is not and ways to reclaim the assets in case of no payments. This has been influenced by the increase in import duty which has been passed down to the customers. Last year the Honda Fit 2010 model was one of our best-selling; in November we sold car 15 but now we have three in our year that have not sold since January this year because of the Sh200,000 increase,” said George Ochieng, CEO, Ineax Motors.
In Kensville Motors case, dealers in UK and Japan cars located in Westlands, it has seen a decrease in the car imports of high-end UK cars such as Range Rovers, thus it has taken to marketing Japanese cars on its website which are cheaper such as Passat.
“We import on behalf of the client, we do not sell, so from the beginning, the client knows the charges they are to incur. We have noticed a decrease in imports especially high-end cars like Range Rovers which have increased over the suggested retail price, “said Kenneth Njagi, CEO Kensville Motors.
Last year it sold approximately eight sports and so far this year it has only sold two. The Lexus hybrid 450 which was retailing at Sh850,000 is one million shillings, the company has imported none this year compared to six last year.