New car sales in Queensland rose 4.7% in February, according to the Australian Bureau of Statistics (ABS). Across Australia, sales rose by 2.9% (seasonally adjusted figure) to just over 95,000 in February, as reported by the Herald Sun this week.
What’s behind the upsurge? According to reporter Mitchell Neems, the February rate cut announced by the Reserve Bank of Australia (RBA) has given an “adrenaline shot to the economy”. The official cash rate now stands at a record low of 2.25%.
Back in July 2014, we reported that low cash rates, which were then 2.5%, represented good news for buyers seeking car finance. This was because low rates make borrowing easier, freeing up more disposable income. The bad news was that the lower dollar would push up the price of imported new vehicles – and 90% of new cars sold in Australia are imported.
In January 2015, new car sales were down on previous years’ figures. This was despite end-of-year clearance deals, the removal of import tariffs on imported Japanese vehicles, and the existing low interest rates.
Two months on, we’re still looking at a weak Australian dollar. At this stage, it seems to have helped the automotive market, particularly at the luxury end, where a continued rise in sales suggests many household budgets are in good health.
Yet, how much of an upswing is the improvement reported for March? It depends which way you look at it and, as ever, there are more ways than one.
- First, the ABS itself advises caution when considering its own data. It’s not that statistics lie (as the famous quote goes), but that small numbers make data less reliable.
- Second, take a closer look at that axed tariff for Japanese vehicles. The 5% tariff was added to the import cost of the car, not the sales forecourt price. This was why discounts on Japanese vehicles were generally low for the customer than those of other brands. That has now changed and discounts are far healthier.
- Third, the slow market in January has landed dealers with more vehicles from last year’s stock to clear.
- Finally, March is also the end of the Japanese financial year, and represents the second highest month of the year for new car sales, as manufacturers aim to improve turnover before closing their books.
That’s why it’s wise to think of the recent rise in sales as a temporary boost, rather than recovery. One thing’s clear though – there’s never been a better time to buy a new car.
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