Car sales boom before GST

Press, 16 September 1986, Page 4

Car sales boom before GST

Car sales are booming in Christchurch as buyers try to beat GST and the rising value of the yen.

Over the last two months, sales of both new and used cars have been at least 10 per cent higher than would normally be expected, according to dealers.

Buyers were under the impression that new car prices would rise 10 per cent because of GST, but that was not correct, said the president of the Canterbury branch of the Motor-Vehicle Dealers’ Institute, Mr Stuart Ware. While GST would add 10 per cent to new car prices, simultaneous sales tax changes would bring prices down 5 per cent, giving a net upward change of about 5 per

cent said Mr Ware.

However, the rising value of the yen would mean that new shipments of Japanese cars, which have the bulk of the market, would be about 17 per cent more expensive, he said.

Some sought-after models were now hard to get.

Mr Ware said that used car sales were also booming, although there were misconceptions about the effect of GST on used car prices. Under the GST system, dealers would get a notional tax credit from the Government for each car they bought, which would offset the final tax payable. In effect, the tax is payable only on the dealer’s margin.

A car valued at $lO,OOO, for example, would rise by only about $l5O, not $lOOO, he said. However, dealers were “hot under the collar” because they would not get credits for cars already in stock. Mr Ware predicted that they would make up for that by immediately raising the mark-up on cars in their yards on October 1.

The main effect on the used car market, however, would be the flowon from rising new-car prices, which would give increased demand for late-model, low-mileage vehicles, he said.

Mr Ware expected little change at the “cheapie” end of the market. “A $lOOO car will still be a $lOOO car,” he said.