Imported Used Cars Aren’t a Threat to Australia

At 16, I fell in love.

My sister and I were in the back of my dad’s fire engine red Ford Falcon — can you imagine the shame? — on an educational Christmas holiday to our nation’s capital, Canberra. They wanted us to learn more about the political system in Australia.

I remember two things from that trip. My sister and mum don’t cope well in a confined space for nine hours. And that bright yellow Jeep Wrangler, roaring beside me on the Hume highway was going to be the love of my life.

Later, a few years after ditching the P-plates and reaching the grand old age of 23, I could finally afford to insure a Wrangler.

I spent far too much money tricking it out with four-wheel driving goodies. And I used to cry filling it up with petrol. The service bill was roughly about the same as a weekly paycheck at the time.

Within six months of buying it, the Aussie Dollar soared and Wrangler prices came down. What I paid for my five year old Jeep could have bought me a new one. Did I care? A little. My Jeep wasn’t worth nearly as much. But thems the breaks sweetheart.

The instant depreciation of my car wasn’t that big a deal. It wasn’t an investment. And based on how much my Yellow Peril cost me to run, it wasn’t exactly a sound financial decision either.

But I didn’t care. I had four wheels, no roof in summer and a car that could take on the big boys in the bush.

Unbelievably, some in the car industry in Australia want you to hear stories like this and be scared.

I mean, imagine the horror of your car losing its value instantly!

This is one of the silly arguments coming from car dealerships around the idea of relaxing grey import laws.

A grey import is the name given to a used car that wasn’t sold here in Australia brand new. Currently, grey imports are limited to specialist and enthusiast cars. Alternatively, the car must have been manufactured before 1 January 1989.

You see, the productivity commission released a report in January this year suggesting these rules change. The commission believes wholesale imports of used cars should be available to Australians.

Imagine that. Australians choosing from a much wider variety than what we’re stuck with now.

However, those with a stake in the car trade want you to think this is bad thing.

They’re trying out a couple angles.

First up is the argument of instant decline of new car sales. When New Zealand changed the policy around imports in the 1990s, new car sales ‘plummeted’ by a third.

Not everyone wants a new car. That’s thanks to the instant loss of value when you drive it off the show room floor.

We no longer have a car manufacturing industry that the government feels it has to protect. So it’s sort of a useless threat.

However, when buying a car most people select the youngest model they can afford. Unless it’s a classic or vintage car, folks try to buy something that’s not too old. Without too many clicks on the dial.

This is for two reasons. I reckon people are smart enough to know that the older the car is, the more things that can go wrong. Newer models are cheaper to run. Perhaps most important is a car with high safety standards and features that accommodate our out tech lifestyle.

Another fear inducing argument is the safety of all these imports. There are reports suggesting that we will be flooded with unsafe cars.

However, the product commission used a 2005 survey from Monash University Accident Research Centre to disprove this. The study noted that there was a negligible difference in crash safety standard between new and grey imports from the same year of manufacture.

Now that study was completed almost a decade ago. During that period, less than a third of new cars received a five star crash safety rating. Today, four out five new cars sold have top marks for safety.

Another myth the car industry is using is the ability to access parts and the resulting brand damage for a manufacturer. They reckon that parts will be tougher to get because imported car parts aren’t regularly stocked. In addition, many mechanics might not know how to fix your ride.

Pish posh.

I spy a business opportunity right there. A mechanic could establish a solid business understanding how to fix imports. And being the one of a few parts dealers with a business specialising in imported car parts.

Oh and the cost! The imports will cost more to service. More to run and the insurance will be so much more say car industry folks. Apparently you’re too stupid to understand this, and need to be protected from yourself.

Here’s the thing. I’m sure when folks are buying a car, they don’t only consider the sale price. Even when I bought my Jeep, I was doing mental calculations of exactly how much the running costs were. I knew it was an expensive decision. Yet being a grown up, I was able to make it myself.

But the biggest fallout — or at least from the industry’s point of view — is the instant depreciation to your vehicle. All these ’new’ used cars on the market will force prices down.

They want to you know that ‘flooding’ the Aussie market with second hand cars will lower what you will get for your vehicle when you go to sell it.

This can only be a good thing for people looking to buy a car. Sure, you’ll get less for your car when you trade it in. However, chances are the ‘new’ used car you’re buying is also cheaper than before.

Reduced prices mean you get a little more car than before. Heck, a one car family might be able to afford a reasonable second car as well, with lower prices.

Then there’s the obvious economic benefit of having more cash left in your bank account to buy something else. You might go out and buy some mad rims for your import. You may blow at the pokies. You may put in the bank to earn bugger all interest. Even stick it in the stock market for a speculative punt. The point is, you have some extra cash that you can spend or not spend in the economy.

We don’t have a local car industry the government needs to protect any more.

So let’s hope the Aussie government follows the productivity commission’s recommendation allowing more grey imports into the country. The sky won’t fall in, like the dealerships claim.

Stop trying to protect us from ourselves. We’ve already got the government to do that for us.

Shae Smith+,

The above article originally appeared in Pursuit of Happiness.


Join Markets and Money on Google+

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors.

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money