Used cars to be 1%-4% cheaper after zero GST

Dealers have anticipated the positive impact to sales, before the re-implementation of the SST


Second-hand cars’ prices may be cheaper by approximately 1% to 4%, following the price reduction of new cars on the zero-rated Goods and Services Tax (GST), effective today.

Federation of Motor and Credit Companies Association of Malaysia (FMCCAM) president Datuk Tony Khor Chong Boon said the reduced prices for second-hand cars should not be confused due to the zero-rated GST (since the industry is under margin scheme of GST treatment) as they follow proportionately the lower prices of new cars.

“Used car prices follow the trend of new car prices, either up or down. New cars will largely be 6% cheaper soon and used cars will follow suit with a reduction between 1% and 4%, given the depreciation of the second-hand cars,” Khor told The Malaysian Reserve (TMR) recently.

Khor said used car dealers have anticipated the positive impact on the sales of used car during the tax holiday, before the re-implementation of the Sales and Services Tax (SST).

At present, Khor said the market has around 70,000 used cars held in the dealers’ inventories.

Meanwhile, Khor said those used car dealers, who also sell new cars, are going to absorb the losses after the prices are reduced since the stocks are already acquired from the carmakers’ distributors two to three months earlier with the 6% GST.

“We hope we could claim back the GST imposed on us on new cars and other things within a short period of time to ease our cashflow,” he added.

TMR reported that secondhand car market in Malaysia has remained stagnant with about 400,000 units sold annually for the past 15 years, whereas sales of new cars are reaching 600,000 units.

Industry observers anticipate the prices of new cars might increase marginally after the return of the SST, but opinions remain divided depending on the carmaker’s respective margin, cost, car model and the basis of calculation.

Former Deputy International Trade and Industry Minister Datuk Seri Ahmad Maslan previously said the GST imposed since April 1, 2015, has positively affected carmakers — namely Proton, Honda and Toyota — which announced price reductions ranging from RM500 to RM4,000.

Ahmad said due to the abolishment of the 10% SST — which was replaced by the 6% GST — other manufacturers such as Nissan, Mercedes, Perodua, Hyundai and Ford also announced a drop in prices of up to 2.87%.