Yen, GST cause car sales slump

Press, 23 October 1986, Page 6

Yen, GST cause car sales slump

PA Wellington GST and the strength of the Japanese yen are causing a slump in car sales, according to Wellington car dealers. . Mr Graham Taylor, publicity officer for the Wellington branch of the Motor-Vehicle Dealers’ Institute, said yesterday that some dealers were in a precarious cash flow position.

The imposition of GST was the “last straw” for many small independent dealers, he said, although he knew of no dealer who had actually gone out of business since October 1.

The biggest slowdown had been in new car sales. The GST content shown at the bottom of dealers’ prices was putting people off even though, a cut in

sales tax when GST was introduced meant the net price rise had only been about 5 per cent. Mr Taylor said private sales had been most affected by GST because fleet owners, while having to pay GST at time of purchase, could later claim that money back. A typical five-door Japanese hatchback, for example, had risen in price between $5OOO and $BOOO since the beginning of the year.

“I think we have reached the stage now where cars are extra expensive in relation to what people earn. It is going to take quite some time for the public to gulp the latest round of price rises.”

Mr Taylor said one effect of rising Japanese car prices had been a move

towards cars from Europe, Australia and Britain. A small three-door Fiat could now be bought for about $16,500 while a Japanese equivalent would cost more than $20,000. The used-car market was also depressed, Mr Taylor said, partly because of confusion over GST and partly because the drying up of the new car market had resulted in fewer good quality used cars coming up for resale.

He said many buyers did not realise GST had to be paid only on the vendor’s margin, not the total price, in used car sales.

Mr Taylor predicted both new and used car sales would pick up going into the pre-Christmas buying “boom” period.