Implication from Chinese used car market

According to FT, the new passenger car sales in China dropped in 2018 but the used car sales rose and the aggregate car sales still rose. It is clear that people still demand more cars in China; however, there are now more people buying cars from the used car market. Previously people were significantly more likely to buy new cars, now many people have turned to the used car market. There could be several reasons to explain this phenomenon.

First, new cars have very expensive premiums comparing with used cars. New cars should be valued higher than used cars; however, when people find the premium given to new cars for being new is too expensive and unreasonable, they will choose used cars. Secondly, it may show that the demand for cars is still growing, but people's affordability is falling, When people still find buying cars necessary but do not have sufficient money to buy new cars, they will buy used cars. Thirdly, improved information in the used car market can help to improve used car sales. One of the reasons that why people buy new cars is because they do not have confidence in the information they receive in the used car market. In the used car market, people do not only seek for lower prices, they also want to the conditions, especially safety, of the used cars they are choosing. When they have more confidence in the information they receive from the used car markets, they are more confident to trade in the used car markets, thus the sales in the used car market increase. Fourthly, people are spending their money more wisely on cars now. There are many reasons that people should wait for buying new cars, such as high premium, the coming of next generation cars. However, owning a car can make life more convenient, so people decide they probably buy cheaper used cars and buy something much better in the future.

I think all these reasons are valid and there may be other reasons and all factors contribute to the phenomenon we see from the Chinese used car market.