The prices of pre-owned cars in Kenya have surged by as much as Sh600,000 over the past four months, rendering them less affordable for many citizens. Recent industry data indicates a significant increase in the prices of second-hand cars manufactured between 2016 and 2017. The rise is attributed to the growing costs associated with importing units from abroad, resulting in a double-digit reduction in motor vehicle imports for the second consecutive year.

Among the affected models, the Mercedes C-Class has seen a notable price increase, with a used car now priced at Sh4.4 million or more, compared to Sh3.8 million in September of the previous year. Similarly, a second-hand Toyota Harrier is now retailing at an average of Sh4 million in Nairobi, up from Sh3.8 million in September last year.

The depreciation of the shilling against the dollar, shedding 14.1 units in the given period and currently trading at 160.4 units, is identified as a key factor driving the surge in prices. Even car models with traditionally lower engine capacity, such as Mazda Demio and Honda Fit, have experienced significant price hikes during this period.

This trend coincides with provisional data from the Central Bank of Kenya (CBK) and the Kenya Revenue Authority (KRA), revealing a decline in spending on car imports by $162 million (about Sh25.92 billion) in the previous year. Factors contributing to this decline include taxation measures, a weakened shilling, increased cost of credit, and reduced production of certain models.

The Kenya Auto Bazaar Association attributes the contraction mainly to the shilling’s decline against the dollar, challenges in accessing bank loans for small traders, and diminished purchasing power of households. As a result, consumers are increasingly turning to locally available vehicles that exceed the eight-year age limit for imports.

The KRA’s decision to raise duty on shipping cars into the country from 25 percent to 35 percent from July last year, coupled with excise duty and VAT on vehicle imports, has further contributed to the rising costs. Additionally, the KRA capped the maximum depreciation rate at 65 percent, leading to higher import duty calculations.

This challenging environment has led to a reduction in orders by some dealers, with the cost of popular models like Subaru Forester and Toyota Premio experiencing significant increases. Dealers also report decreased business and stricter financing conditions from banks.

Official data shows a decline in expenditure on vehicle imports from a peak of $1.3 billion in 2021, with global production disruptions, including a semiconductor shortage, affecting shipments. Treasury Cabinet Secretary Njuguna Ndung’u highlighted the impact of declining vehicle sales on government revenues in the 2023 Budget Review and Outlook Paper. Kenya allows the importation of second-hand cars within an eight-year age limit, and Japan, the United Kingdom, and South Africa are key source markets for used cars imported by local dealers.

$1= KES 162.1301

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