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Price Controls Make Venezuela the Only Country in the World where Used Cars Cost More than New
Posted By Daniel Greenfield On September 27, 2013 @ 2:08 pm In The Point | 12 Comments
The problem with price controls is that while you can control the price of a commodity when it’s new, you can’t control the supply of that commodity, leading to shortages and secondary markets form up.
Venezuela is determined to repeat all of the USSR’s mistakes. And that makes it the only country where used cars are worth more than new.
On TuCarro.com, a popular used car website, a secondhand 2012 Jeep Grand Cherokee is more than double the price of a new one. Similarly, five-year-old Ford Fiestas and Explorers easily match factory sticker prices.
But that’s because you can buy the used car. Good luck buying a new one.
For the past nine months, Luis Medina, a building caretaker, has scoured new car listings, searching for a light truck or SUV. Despite having the cash in hand, he’s regularly turned away from dealerships due to years-long waiting lists.
General Motors, Mitsubishi, Nissan, regardless of the make, vacant showrooms in town and country are the rule rather than the exception. “Everything’s sold a year before it reaches the floor,” says Giovanni Rubino, the manager of an empty Ford dealership in eastern Caracas. “And our waiting list,” Mr. Rubino laughs, “is infinitely long.”
Just because the government sets a price, doesn’t mean the car will be available at that price.
The premise may leave car enthusiasts in other parts of the world scratching their heads, but vehicles actually gain in value in Venezuela – as soon as they’re driven off the new or used lot. Shortages and government mandated currency controls have shot off preowned prices, as many consumers are desperate to find a car.
But don’t worry. The government is on it.
Venezuela’s National Assembly has sought to throw the breaks on soaring car costs. Last month, a bill was passed that, if signed into a law by President Nicolás Maduro, would attempt to regulate both new and used car prices, levying hefty fines and even jail time on venders who don’t comply with government approved prices.
“This law confronts speculation, hoarding, [and] usury directed at Venezuelan families, who – with their hard work – want to buy the vehicles that are being practically stolen away from them,” said National Assembly Vice President Dario Vivas, upon the bill’s passage.
Once the bill becomes law, there will be a black market in used cars. And no more new cars will be available so that Venezuelan families will find it impossible to buy cars.
Especially since Venezuela didn’t want to import cars. It wanted to make its own cars.
Authorities began curbing imports starting in 2007 with an aim to boost national production…
What did Venezuela’s own cars look like?
As a product of economic agreements between Venezuela and Iran, the joint car company Venirauto released its first 300 units at an event in Caracas yesterday. The factory, located west of Caracas in Maracay, will produce some 25,000 cars per year using Iranian technology.
Shockingly no one seems to want them. I guess a car with a built in explosive device on the engine that gets 2 feet to the gallon isn’t that appealing.
After more than a decade of currency controls, greenbacks have become increasingly hard to find for both carmakers and consumers alike. The short supply of dollars is not only undercutting motor vehicle production, but is also upping preowned prices as consumers scramble to hedge themselves against the loss of value of the local currency and spiraling inflation, says Barclay analyst Alejandro Arreaza.
So Venezuelans are dodging inflation by buying used cars.
Facing 20.1 percent inflation and capital controls introduced in 2003 that limit the amount of bolivars citizens may take out of the country, Venezuelans invest in durable goods.
“Cars gain in value instead of depreciating because of a supply and demand crisis,” said Henkel Garcia, an analyst with Caracas-based economic consultancy Econometrica. “In Venezuela we buy cars to protect our wealth.”
But don’t worry. This can’t happen here. Not in Obamerica.
The shortage of used cars stems from the deep plunge in new-car sales between 2008 and 2010, and the virtual disappearance of new-car leases during the financial crisis. As a result, three-year-old cars are now hard to find and even older models are holding their value.
Cash-for-clunkers rebates also took many older vehicles off the road. The scarcity has pushed up used car prices, often to the point that consumers who finance a purchase with subsidized interest rates can get brand new vehicles for about the same as a monthly payment required for a late-model used car.
Nearly every car traded today has more than 100,000 miles on it, and finding decent used cars means cold-calling owners, even when they aren’t thinking of selling.
Elect a Socialist, get Socialism.
Any day now, Obama will be nationalizing toilet paper factories.
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