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The car in Jamaica's economy

BY ALFRED W SANGSTER

Saturday, June 08, 2019

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Transportation is a functional necessity for every individual. We have to travel for work, shopping, schooling and pleasure. For many people the car is not just a functional tool — their car is also associated with their self-image or status.

The public transportation system is not good, which increases this need for personal transportation. It is also a matter of concern that our Jamaican roads are not suited for the high-priced luxury vehicles, some as high as $19 million dollars and more.

The tables accompanying this article give information on the cost of some 18 cars frequently advertised in Jamaica (Tables 1A). There are additional tables — one that lists some large dealers and special events (Table 1B), another listing models currently/due to be discontinued (Table 1C), and finally, one of the world's most expensive cars (Table 1D).

What are the implications for the nation with the high cost vehicles? STATIN 2017 preliminary data [Ref 1] indicates private passenger vehicle imports (including SUVs) of approximately US$468 million (calculated from data set by author). Our foreign exchange earnings, largely through agriculture, bauxite, and tourism, are significantly eroded by the payment for these cars. Our road infrastructure is being upgraded at great cost to us to cope with the increasing number of vehicles. From the Government's point of view there are benefits for these importations.

The purchase of these cars provides tax revenue and contributes to GDP, which is low for Jamaica. GDP is a measure of the income of a country typically in a year. World Bank data show that GDP per capita for Jamaica in constant 2010 USD has not moved much between 1969 (US$4,147) per person) and 2017 (US$4,826 per person). The Government also earns significant revenue from taxes on petroleum products.

We need to take a look at the impact of the car on the individual in the Jamaican economy. The Jamaican economy is bombarded with advertisements about cars for which many people are willing to pay high prices. The nation suffers in that people spend money on luxury items rather than on projects for national development.

The country cannot afford the cost and individuals should not get trapped into debt. The average Jamaican cannot afford these high prices without going into debt, with the expenditure on cars at the expense of other priorities. The personal priorities would include housing, education, insurance, health and much more.

Banks and financial institutions are competing with each other to provide loans to purchase cars. Can the Jamaican community afford the high-priced cars that are being offered? The high prices move down to the used car market.

Fleets of cars awaiting purchase are parked in open spaces in the city capital lying idle. The millions of dollars changing hands is a wasteful national expenditure, and the society needs to practise disciplined care for the ownership of a car and the priority of financial planning.

Everyone has the option of making a choice between saving and spending in some discretionary areas of their lives. A car purchase is one such area. Savings produce a return, or at a minimum, attempts to preserve/grow the value of the resources you have. Spending for consumer items retains only the depreciating asset value each year, and this value is even lower if the purchase is financed with expensive consumer debt.


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