Written by Staff Writer
06 Nov, 2015 | 5:26 pm
With increased excise duties and a decreased debt-to-equity ratio, the vehicle financing market is likely to see sales largely from smaller, cheaper cars in contrast to the previous year’s high demand for both low priced cars and mid-range cars like the Vezel and Axio Hybrids, Carmudi Lanka, an online vehicle retailer said.
A recent tax hike aimed at curbing car imports and the outflow of foreign exchange has slowed the vehicle financing market.
“Recent events resulting in vehicle values going up have definitely affected the market,” Firaz Markar, Managing Director of Carmudi Sri Lanka said.
“We see lower sales in vehicles since the news broke of this increase. Interest rate changes are not expected to affect the market drastically due to it being a very nominal increase thus far,” he said.
“We will continue to monitor the market over the next month or so as dealers adopt a wait and see approach towards vehicle buyer intent. We expect the market to return to normalcy over the following month or so with sales expected to be largely within vehicles falling within lower price brackets,” Markar said.
In Sri Lanka, majority of new and used vehicle registrations are backed by vehicle financing.
Further changes to vehicle taxation policies and a reversal on downward interest rate momentum could trigger an alternate model where consumers may be forced to take on a larger proportion of the total cost, Carmudi Lanka cautioned.
This may also signal finance firms and banks to readjust conditions for vehicle financing in a market where vehicles are seen as a smart investment.
“Sri Lankans see vehicles as a smart investment and have capitalized on cheaper funding lines making purchasing heavily reliant on car financing options,” Markar said.
“There were lot of first-time buyers entering the market by financing small cars and motorbikes,” he said.
Low interest rates, lower debt-to-equity ratios, versatile lending products catering to first time buyers and government permits to public servants have all contributed to the growth of the vehicle financing market.
August 2015 saw 68.4 percent of new cars, 64 percent of used cars, 57.4 percent of two wheelers and 91.6 percent of three wheelers being financed.
New car registrations hit an all-time high of 4990 in August 2015 compared to 788 units registered in the same period in 2014. Small cars made up 94 percent of all new car registrations, with Maruti being the market leader with 81.7 percent registrations in the small car category.
Motorcycle registrations rose 35 percent to 25,655 units in August 2015 from a year earlier.
Registration of three-wheelers, increasingly used as personal transport vehicles also rose 46 percent.
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