Used car prices in Kenya have risen by up to 30% in the last three months due to the weak shilling, scarcity of vehicles, and rising shipping costs, pushing low-end models like the Vitz above the Sh1.2 million mark.
According to data from the Kenya Auto Bazaar Association, which represents used car dealers, popular 2015 Japanese models such as the Toyota Harrier, Toyota Fielder, Toyota Premio, and Nissan Sylphy have increased in price by between Sh150,000 and Sh400,000 since April.
Due to cost concerns, buyers are canceling orders and favoring Nissan and Mazda brands over popular Toyota models.
As a result of semiconductor shortages in electronic devices, dealers are facing increased competition from buyers in source markets such as Japan and the United Kingdom.
Most buyers in developed markets would normally purchase new cars, but due to scarcity, they have resorted to used models.
As if that wasn’t enough, the shilling’s depreciation against the dollar has increased the cost of imported commodities as shipping lines raise ferrying costs.
A used 2015 Mazda Demio costs 30% more at Sh1.3 million, up from Sh1 million in March, while the Toyota Vitz costs 26.3 percent more at Sh1.2 million. The Kenya Auto Bazaar Association’s secretary-general, Charles Munyori, warns that prices are unlikely to fall or remain unchanged in the coming months.
“The weakened shilling has hit the sector and now a Vitz that previously you could get for a Sh1 million is now costing Sh250,000 more,” Mr Munyori said.
“Kenyans should not expect prices to come down anytime soon unless a miracle happens because we are in for a hard time.”
Traditionally, car prices gradually fall from April to December. But dealers reckon this trend has not played out this year.
“The market will stabilise once there is a sharp rise in new cars in Asia and western countries. This will take time,” said Mr Munyori.
A global shortage of computer chips used in car production, as well as other materials such as copper, aluminium and cobalt, has led to fewer new vehicles rolling off production lines.
As a result, more buyers are turning to used cars, with demand driving up second-hand vehicle prices at an unprecedented rate.
Companies and individuals who purchase vehicles using bank loans that cover vehicles less than eight years old and recover the debt within four years have been hit by the price shock.
Vehicles registered in 2015 are primarily affected, as they are within the eight-year period allowed for imports into the country. Japanese vehicles account for more than 80% of the Kenyan used car market.
A 2015 Honda Fit now costs Sh1.3 million, up from Sh1.15 million in March, while the Nissan Sylphy costs Sh1.4 million, up from Sh1.25 million.
Mazda Demio, Honda Fit, and Vitz are popular with ride-hailing apps like Uber and Bolt, and the price increase appears to be hurting the majority of young people who buy the vehicles to work in transportation.
In the same period, the price of a used Mercedes-Benz C-200 2015 model increased by Sh0.5 million to Sh2.7 million, while the price of a Toyota Premio increased to Sh2.2 million from Sh1.6 million.
A 2015 Land Cruiser ZX (petrol engine) costs Sh9.5 million, up from Sh8 million in March, slowing sales of the high-end vehicle, which dealers expected to pick up during the campaign season as Kenyans prepare for the August 9 General Elections.
The weakening of the Kenyan shilling and bottlenecks in global supply chains, which have inflated container and shipping costs, have exacerbated the problem of car shortages.
The shilling closed trading at Sh117.90 per dollar on Friday, down from Sh114.95 in April and Sh107.85 a year ago, making imports more expensive as car dealers require more local currency to purchase foreign exchange in order to place orders for vehicles priced in foreign currency.
Traders reported that strong dollar demand from various sectors outweighed thin inflows.
According to Antony Aleri of CarMax East Africa, a leading dealer of used vehicles in the city, the increase in shipping costs has exacerbated the market.
“Shipping is taking longer and is costlier due to the fact that the majority of the shipping lines give priority to the brand new vehicles for which premium price is paid,” said Mr Aleri.
According to dealers, car orders placed in March had yet to arrive in the country as of last week, highlighting the impact of high shipping costs and supply disruptions.
The value of car imports dropped in the three months ending March compared to the same period last year, indicating that fewer vehicles were shipped in due to higher unit costs.
According to official data, Kenya imported cars worth Sh18.53 billion in the three months to March, compared to Sh23.16 billion in the same period last year.
