Black money and cars? Well, there’s more to it than meets the eye. We explain how this ‘surgical strike’ on black money will impact the way you buy and sell cars. This is a major step in moving to a cashless economy where all transactions are electronic (or at least can be traced). Currently, we are an economy with large amounts of cash in circulation – so the demonitization is bound to have an impact on how we transact everything.
People aren’t going to buy cars…
If only for a few weeks, until more clarity emerges about how large purchases can be made through cash. Bookings for new cars generally happen with hard cash.
Such bookings are likely to take a hit in the coming weeks at least as people find that dealers have stopped accepting rupee notes of 500 and 1,000. Since it’ll take a couple of weeks before new 500 and 2,000 rupee notes are introduced, expect a slow November in terms of car bookings.
Luxury cars and cash? Thanks but no thanks!
Have a stash of cash, in 500s and 1,000s? You can no longer walk into a car dealership, unload the stacks of money and drive off with a brand new luxury car. While such a phenomenon was quite common in the past, the demonetization that’s kicked in from today makes it near impossible for anyone to buy a car with old 500 and 1,000 rupee notes. So, you can’t use black (unaccounted) money to purchase a car as an easy way out. Don’t be surprised to see luxury car sales dipping.
Discounts? Oh yes!
It’s the end of the year, a time when car sales are subdued. Car makers are already laying out attractive discounts to push sales. And the latest demonetization move by the government won’t help. With demand dulling even further,car makers and dealers are expected to offer even larger discounts, in an attempt to allure buyers. So, if you have white money, it’s a good time to go car shopping. Make sure you bargain hard.
Say hello to car bookings on PayTM, Flipkart and Amazon
Over the last couple of years, car makers have tied up with online platforms such as PayTM, Flipkart and Amazon for car pre-bookings. Now that the government is trying hard to digitize payments, such platforms are likely to see a rise in the number of car bookings. Why, almost every big car maker might tie up with such platforms for a seamless car booking experience. More power to you, the buyer!
Used car sales could be hit
The government is heavily involved in new car sales through taxation. The car maker, the dealer and the buyer, all have to pay various taxes at different times of a new car purchase process. In other words, the government keeps a close watch on new car deals. Used cars? Well, it’s a jungle out there. Transactions happen in cash, and apart from the RTO registering a change in ownership, the government doesn’t really bother. Since cash supply will reduce, used cars sales are likely to get hit.
Cheaper used cars?
Yes! This is pure demand and supply. There will be a bunch of people wanting to dispose their used cars quickly. Such people will have to sell at lower prices as demand decreases. So, bargaining hard while opting for a used car is a good idea at least for the next couple of months. The more expensive the car, the bigger the price drop.
Cars to evade tax?
Life just got harder. Companies buying cars and registering them to claim depreciation benefits, and then quickly selling them to individuals at lower prices, in a mix of cash + cheque transactions, are likely to come to an end. The individuals who opt for such transactions do so in order to evade tax by paying for a part of the purchase in hard cash. The demonetization of 500 and 1,000 rupee notes will stop this, at least for a few weeks or months.