What was a hugely-rewarding business venture, the importation and selling of used cars (better known as Tokunbo) now yields minimal returns on investment.
In the past few months, specifically in the final months of 2014, dealers in Tokunbo cars have been on the receiving end of some harsh conditions, leading many of them into bad business.
First, it was the implementation of a new on importation tariff by the Federal Government as part of its New Automotive Industrial Policy Development Plan in July 2014. The new measure saw importers of used cars paying a 70 percent duty (a 100 percent rise from the previous 35 percent).
Now, however, the business is faced with another challenge, which if not curtailed soon could possibly spell doom for the dealers – the skyrocketing value of the dollar.
At the last check (on Friday, March 6, 2015); the United States (US) dollar has appreciated to about N226; while the British Pound stands at about N325.
This means that importers pay significantly more than they did last year when the dollar to naira exchange rate was more favourable at less than N180. Prices have, as a result, been driven up as dealers attempt to recoup their investment.
ENCOMIUM Weekly’s findings show that prices have gone up to 36 percent this year. This much was revealed when our correspondent spoke to some used cars dealers in Lagos who unanimously fingered the current dollar to naira as the main reason behind the hike in prices.
They, in addition, pointed out that tokunbo cars are losing the customer pull it always had as the price difference between it and new cars is now closing up.
Here are current prices of some Tokunbo cars, compared to last year with the percentage increase in the prices:
Mercedes Benz C350 2003 is sold for around N2,500,00. However, before the exchange rate rose, it went for about N2,000,00 (a 25 percent increase)
Mercedes Benz M Class 2002 was sold for N1,700,000; now, it goes for N1,800,000 (a 5.88 percent rise)
Hyundai Veracruz 2010 is sold N4,200,000, rising from its previous price of N4,000,000 (a 5 percent leap)
Nissan Pathfinder 2005 jumped to N2,200,000 from N2,000,000 last year (representing a 10 percent increase)
A Lexus RX 2005 goes for N2,900,000; last year, you would get it for around N2,600,000 (a 11.54 percent increase)
With N1,900,000, you would get a BMW X5 2006 last year; now, however, it goes for about N2,100,000 (10.53 percent rise)
Before the exchange rate rose, around N2,700,000 would get you a Honda CR-V 2007. Now, it goes for up to N3,200,000 (a 18.52 percent jump)
Honda CR-V 2004 was sold for N1,400,000; now, you’d splash up to N1,500,000 (a 7.14 percent leap)