The car and light utility vehicle market has been flipped on its head in the past two years, with new and used vehicles fetching record prices and wait times on a replacement blowing out to a year in some cases.
A combination of the COVID 19 pandemic limiting production lines, shipping and a shortage of microchips has been blamed for the supply issues – with a fire at one of the world’s largest microchip factories in Japan last year adding to problem. Growing demand for computers and phones is also putting pressure on microchip supply.
According to Wheels Magazine some of the most popular farm vehicles are experiencing the biggest shortages. The Toyota Landcruiser 300 series is averaging eight month wait times and Rav4 Hybrid and Landcruiser 70 series has blown out to a year. Ford Ranger, Mitsubishi Triton and Isuzu D-Max are also in short supply.
New vs used cars
A bizarre reaction to the shortage of cars has been the emergence of the used car market, with second-hand vehicles costing the same, if not more, than new cars – a premium in not having to wait.
Mr Long said there was still benefit in buying used car. But he said caution was needed when selecting finance options.
“The risk here being the purchase of a second-hand motor vehicle on an inflated market due to consumer demand and the impact on cash flow in future years,” he said.
“For example, if a farmer is purchasing a second-hand ute today, for well above the price of a new vehicle, and the vehicle has a few years of age on it already what will it be worth in five years’ time? It’s not a five-year-old vehicle but possibly a seven or eight-year-old vehicle at the end of the loan term.”
Mr Long said the company had been looking for some options outside the more recognised brands to reduce costs.
“We are seeing an increase in clients looking to take what’s available, like Chinese and Indian manufactured cars,” he said.
“But I suppose more evident is the value of second-hand vehicles versus new given the ability to buy at auction today and drive away and utilise immediately versus a six to 12 month wait on new vehicles.”
Mr Long said there were three main considerations when considering buying a new farm vehicle.
Second Hand vehicles – do you really need to finance over five years if you’re looking to replace that older vehicle in three years’ time?
Can you schedule to pay the GST on the purchase upfront or in the 4th month, once received back from the ATO? It’s always a false economy to finance the GST component of a motor vehicle or machinery purchase and then pay interest to the financier for the life of the loan.
Do you need to have a loan with large end Balloon payment or will a little extra each month result in a positive equity position in the vehicle at the end of the loan compared with a potential negative equity situation?
With the inflated second-hand car market, Mr Long said consumers should be trying to maximise the trade in.
From Beef Central