KEY POINTS:
Now is the time to buy a second-hand car, as the global credit crunch piles pressure on motor dealers desperate to shed stock.
Experts predict the used car industry could shrink dramatically over the next year, but canny buyers will be able to pick up bargains over the next few months, despite the weakness of the dollar against the yen.
Independent Motor Vehicle Dealers' Association chief executive David Vinsen blames slowing sales and finance company collapses for the biggest downturn he has seen in more than 20 years.
He says car dealers are doing everything they can possibly do to attract customers, but adds: "Some are not going to survive."
Mr Vinsen says associated businesses, such as shipping and car inspection companies, have lost more than a third of their business this year.
In 2006, 167,000 vehicles were imported; the figure is 85,000 this year and industry sources say it is unlikely to be much above 50,000 next year.
One problem is that people are less likely to upgrade or buy on a whim during a financial downturn.
As well, the credit crunch is making it increasingly difficult for car dealers and buyers to arrange finance.
"So at the moment, it's a complete stagnation of the system," Mr Vinsen said.
But the flipside is that a depressed market is a buyers' market.
Automobile Association technical adviser Jack Biddle said it was a great time to be buying a car.
"You have the upper hand, meaning you can shop around and be selective. It is a buyers' market because everyone wants to move stock."
Statistics New Zealand figures show vehicle sales have slumped 16.6 per cent - $119 million - since September last year.
Several high-profile car dealerships and finance companies have run into trouble.
Motorcorp Distributors managing director Wallis Dumper agrees the time is right to buy and says the best second-hand deals are likely to come from "high turnover, low-margin" dealers.
"It's a good time to buy a car off a distressed dealer. They have got too many cars, and the cost of holding cars is frightening."
New cars are also a good pre-Christmas bet, but Mr Dumper says rising component costs - compounded by a weak New Zealand dollar - could boost prices by 10 per cent in the new year.
Honda and Mitsubishi have raised their new-car prices by about 5 per cent, and other big brands are expected to move soon.
But Mr Vinsen says second-hand dealers still have tens of thousands of unsold cars, having stocked up late last year before new emissions standards introduced by the Government in January effectively banned imports of pre-1998 Japanese vehicles.
Downhill ride:
* 167,000 vehicles imported in 2006
* 85,000 vehicles imported this year
- additional reporting David Eames and Mathew Dearnaley
