Khalif Kairo a car dealer posing for a photograph at Diamond plaza in Nairobi on March 31, 2022. PHOTO | EVANS HABIL | NMG
When Toyota Vitz and Nissan Note hit Sh1 million, ignited by demand and a global shortage, Kenyans with older vehicles realised that they are sitting on wealth.
It used to be a law as sure as gravity: a car depreciates the moment you drive it off. But nothing is the same anymore, and the pandemic has turned cars — typically seen as depreciating assets — into investments.
The fact that not many buyers want to spend millions of shillings on small cars has pushed older vehicle owners into the sellers’ market.
Those with two or more cars that are clean and well-functioning, or who can use alternative means of transport are now selling their cars for a tidy profit.
Amadi Andrew, who sources cars for clients whose prices vary from low to very high, and has a Rolodex of most car yards says he recently sold a used car for Sh750,000. It was bought for Sh820,000 and had been driven locally for two years.
“I mean, when you look at the margins, the client was basically driving free for those two years,” he says.
“Just compare that to a Mazda Demio, a 2015 model, which I sold for Sh1.1 million. It had stayed at my yard for more than a month but previously would move in two weeks.”
Another car owner says he sold his 2012 Toyota Prius that he had bought at Sh630,000 last year for Sh830,000, shocked at how its value had appreciated in just months.
This is not a Kenyan trend. The pre-owned car has become the best investment of 2022, perhaps besides houses, especially if the model is popular.
Globally, rising car prices are turning many into sellers. Some are getting rid of unnecessary second cars or younger drivers switching their vehicles for motorcycles to make extra cash.
In developed markets like the US, few people used to buy pre-owned cars but the slow production of microchips following resumption after the pandemic has put the brakes on the rollout of new cars.
Automakers are competing against nearly every other market for a small slice of the semiconductor pie. Everything requires a microchip, from dishwashers to video gaming devices.
The problem is compounded by the fact that premium cars, which are mostly sold in the West, and have advanced safety and entertainment features, need more chips.
Kairo Khalif who owns a car yard in Nairobi’s Valley Arcade called Imports By Kairo, says the problem is bound to get worse before it gets better. And that some locally-used cars are now worth even more than they cost when they were bought.
“Currently, I can’t seem to meet the demand,” he says.
“It’s worse if you are buying a first car. If you had saved Sh700,000 or Sh800,000 for an entry-level car, you’ll have to dig deeper because that money isn’t enough at this time.”
Marvin Gakunyi, a car enthusiast, is a proponent of buying locally-used cars, and he is driving one.
“Locally-used cars are making a comeback. Many buyers now realise that a new car is not the number plate but rather how it has been driven or gently used,” he says.
The reliance on a few markets has also worsened the problem. Kenya relies heavily on Japan as its source market for second-hand cars.
“Kenyans drive on the left so we are very limited with where we source our cars. This is further compounded by the fact that we are competing with Uganda, Tanzania, New Zealand, and Jamaica, among others for these cars,” Mr Kairo says.
The dollar rate has also played a role.
“Since we primarily buy in dollars, if it’s high, we pass it on to the consumers,” he adds.
Mr Amadi, who started the business as a side hustle while working at GTBank but fully branched in June 2021, adds that a 650cc Suzuki Alto that would normally go for Sh550,000 to Sh600,000 is now as high as Sh900,000.
“Who in their right mind will pay Sh900,000 for a Suzuki Alto? No disrespect to Suzuki Altos, of course?” he says. The high prices has lowered the demand for smaller cars. Before the jump in prices, he would sell about five small cars but now only one or two are bought.
“They used to sell fast because of their fuel efficiency and price. Mostly because they are best suited for Uber and female drivers.”
Popular 2015 Japanese models such as Toyota Harrier, Toyota Fielder, Toyota Rav 4, Toyota Premio and Nissan X-Trail have seen a staggering price increase of between Sh408,000 and Sh791,000 since August, according to data from Kenya Auto Bazaar Association, which represents used car dealers.
A Toyota Harrier is at Sh3.64 million, up from Sh2.22 million.
“Now factor in insurance, shipping and purchasing the car,” says Mr Amadi, adding “You pity the client but this is a cold business. It’s a seller’s market.”
He further adds that they are now demanding a commitment fee from the buyers and steering away from bank financing.
The most sought-after cars are BMWs, at least at Mr Kairo’s yard.
“Right now, I cannot service my clients’ requests for BMWs,” he says.
“I have three clients who want BMW (the 328 model), and I don’t see them getting the cars anytime soon.”
At Mr Amadi’s yard, it is Toyota and Mazda models that are the most sought-after. “Many people come for Mazda Demio, Honda Fit, Toyota Prado, Toyota Vitz, Toyota Probox, Nissan Note, Toyota Auris. That’s the order of most-selling as per my clients,” he says, adding that many buyers care the most about mileage than the year of manufacture.
“In any case what matters most in a car are the specs, history… since most of these cars have already been used abroad, mileage should be the least of buyers’ concerns.”