Parallel Importers

[Guest angela]

Parallel importers use revised rule to bring in high-end cars at cheaper prices

Christopher Tan

Senior Correspondent

The Straits Times

Wednesday, 11 June 2008

Tales of used cars passed off as new are rather old. But now, some parallel importers are declaring new cars as used - in what could be attempts to benefit from a revised ruling that inadvertently leads to lower taxes for imported second-hand cars.

Last September, the Land Transport Authority (LTA) lifted a barrier on imported used cars when it ruled such vehicles are eligible for scrap rebate, like new cars.

The rebate, paid by the Government to the owner if he scraps the car before its 10th year, can amount to several hundred thousand dollars for some cars.

Since September, about 60 imported used cars have been sold here, including a Rolls-Royce, Honda NS-X sports car and a stretched Chrysler limousine.

Many more are on sale now. But industry sources said some of these are actually in showroom condition, but declared as 'used' to attract lower open market value (OMV).

OMV, determined by Singapore Customs, is the rate on which car taxes are based. Hence, the lower a car's OMV, the less tax it attracts. Importers are able to sell such a car more cheaply, and often still enjoy a healthy profit.

The Difference

Parallel importers who bring in cars this way focus on high-end models, because used cars from overseas are liable for a $10,000 special tax.

One popular import is the Nissan GT-R sports car.

The average OMV for parallel-imported new GT-Rs is $80,000, while a subsidiary of authorised Nissan agent Tan Chong has brought in cars with OMVs of $115,000.

Now, a 'used cars' advertisement on car retail website sgcarmart.com lists a GT-R that is less than five months old and which clocked only 138km.

That's less than some brand new cars found in showrooms here.

Its advertiser claims its OMV is $65,000, and is asking $258,000 for it - about $22,000 less than brand new parallel imports and $72,000 below Tan Chong's.

One trader said the OMVs of some GT-Rs brought in this way are much lower.

The development may pose yet another challenge for authorised agents who have been losing ground to parallel importers.

Motor trader Karsono Kwee, 60, who lost 5 to 10 per cent of Porsche sales to parallel importers last year, said: 'It's beyond our control. We can't compete with them because our OMVs are much higher.''

Mr Kwee added that some parallel importers are enjoying fatter margins than authorised agents because of their lower OMVs.

Mr Eric Chan, 39, Mercedes-Benz general manager at multi-brand agency Jardine Cycle & Carriage, reckons consumers who buy low-OMV cars because they are cheaper 'do not know that they are buying at a disadvantage''.

He pointed out that a low OMV also means a low scrap rebate.

For instance, an eight- month-old Mercedes SLK200 with an OMV of $26,000 would fetch a rebate of $13,000 if scrapped just before its 10th year.

On the other hand, a brand new one from Cycle & Carriage would attract $25,000.

Another example: an 18-month-old BMW 730Li with an OMV of less than $30,000 would fetch $15,000, versus $44,000 for a new car from BMW agent Performance Motors.

But car buyers shrug off the difference. Asked if he would buy a 'used' GT-R with a low OMV, enthusiast Kevin Kwee said: "As long as the price is right and the annual depreciation is right, it's okay."

A leading parallel importer said he is aware of the new goings-on. "Some of the OMVs of these so-called used cars are less than half the OMV of a new car," he said.

"If this carries on, I don't know how the rest of us are going to continue our business."

[Guest SgLaKsa]

For instance, an eight- month-old Mercedes SLK200 with an OMV of $26,000 would fetch a rebate of $13,000 if scrapped just before its 10th year.

His above example is not true, Most PI's SLK are with higher OMV instead of lower because PIs bring in SLKs with higher specs to attract buyers (Higher cost of car = Higher OMV). Its around $50K+ compared to $40K+ from C&C. Mine is almost $52,000. :thumbsup: :thumbsup: :thumbsup: