Sunday, December 30, 2007

New Cars

If you live in Tokyo, there is one sight which is strangely rare compared to back home. I don't believe I have seen an old or beat-up car once since coming here. While it is clear that people tend to be relatively obsessive about keeping their cars clean and well-kept, there's more to it than that.

Though many of my students have driver's licenses, few of them have cars so it's not a topic which I often discuss with folks, but one of my students told me something which fills in part of the picture of why there are so few (or no?) old cars driving around. We were discussing vans and large vehicles in general and she mentioned that she had a BMW van. I found this rather surprising since she has no children and her husband works a lot so they rarely travel. She told me that the van was really too much for her in terms of her needs and it was actually hard for her to handle when navigating the narrow roads in Japan.

Given her discomfort with handling a large vehicle, I asked her why she didn't just buy a regular car. This is when she enlightened me about the financial side of owning a BMW in Japan (aside from it being an expensive luxury car). Her current BMW is actually her fourth one. She said that her three previous models were sedans and she'd grown tired of having the same sort of car so she'd chosen a van as a change of pace, but now regretted it. When queried as to why she'd changed cars so often, she told me that she didn't want to but the financing structure made it desirable to do so.

She couldn't speak to the situation with all car makers in Japan, but she said that BMW set up a loan situation where one paid 1% interest on the loan for the first 2-3 years. After that length of time, the interest on the original vehicle would jump up to 3% or the buyer could trade in the old model for a new one and renew the 1% rate. This is an interesting policy not only because it encouraging one to keep buying a new car, but it also encourages one to remain with the same maker's models indefinitely. In fact, my student said that she wanted to get a different model car but the financial side discouraged her from doing so. It's an interesting system which encourages customer loyalty and a steady stream of new purchases, though it does seem a little like putting them in an economic straight jacket to get them to do so.


Roy said...

BMW has some interesting financing which is one of the reasons why BMWs are very common in Japan. I did a bit of work on the online load calculator for BMW finance way back so know a little about it.

But the real reason why there are few beat up cars in Japan is because of the "shaken" or mandatory inspection you have to do after 3 years for a new car and every 2 years after that.

The inspection is very strict. They look for the obvious non-regulation stuff like how much you've lowered your car, no blue lights etc. But they also have defined standards on how well a car should be performing. If your car is older they may tell you to change your tires, muffler, engine etc etc. And it can get really really expensive. Usually, the price of the shaken itself starts from about 70,000yen. If they make you change the tires only that's another 100,000yen right there. It comes down to the fact that beat up cars are too expensive to maintain.

Also, once a car's shaken expires the trade in price drops substantially. That's why most people will trade in their cars at around 2.5 years.

Common sense suggests that keeping the car is less expensive than upgrading but in Tokyo cars are luxury items rather than necessities so I don't think people really mind spending money on that which gives them pleasure. And I'm not trying to justify the fact that I've had 3 new cars in the last 4 years either ;-)

Jon said...

I've never lived in Japan, so forgive me for asking, but - I don't really see the need for lots of cars in Japan anyway (depending on where you live, I suppose). I mean, especially Tokyo. The subway system pretty much takes you wherever you need to go, and usually very quickly, does it not?

Also, I may have read this already but if so I've forgotten - where are you and your husband living in Japan? I'm just curious :) I'm actually trying to figure out if I will be able to take a short (possibly 2 weeks?) trip to Japan with my girlfriend this coming early June 2008. We are both 19, and doing this on our own, so the only thing really stopping us at all is the dreaded financial side of things. :\
We'll also be doing this months before we begin college, and somehow throwing away every cent you have before you start college doesn't sound like the brightest idea to me...but it's sooo tempting! The main purpose for the trip is to go to Japan to see the country and the people and visit places/explore (possibly even see a concert), and just generally get a nice feel to the place in the (very) short time allotted, because as of now I plan on joining the JET Program after college to teach conversational English over there. Hostels (while maybe not the coolest places ever) seem to be the cheapest places to stay, so we're thinking about those. But the flight tickets are insane! We both live in Georgia, by the way. Got any suggestions on somehow secretly sneaking onto airplanes? :P

Yikes, long comment. Sorry about that!

Roy said...

Jon, you can live a completely convenient life in Tokyo without a car because as you say the Tokyo train system is very convenient. However, after living here over 17 years you'd get tired of riding the packed trains all the time. Since I could afford it I bought a car. That opened up a whole new experience to me because I found many wonderful places outside of the immediate urban Tokyo core areas that are easy to get to by car but not by train. Also, it's wonderful to be able drive to go for skiing or on day trips to onsens in Hakone or Mt. Fuji rather than hanging around in crowded shopping areas like Shinjuku and Shibuya.

Also, if you do end up coming to Japan on Jet and placed somewhere in the countryside you will probably end up getting a car too. Most Jets I've known do. It might be a good thing to get that International license ready.

Shari said...

Roy: To be honest, when I posted this, I knew that there were other parts of the picture regarding the shaken which you would likely come in and pick up the slack on since you know a great deal more about cars in Japan than I. I had heard about the inspection system and how it makes it financially imprudent to keep old cars but didn't know in detail. I very much appreciate your taking the time to post additional information.

Since most of the "used" cars from Japan get re-sold in other countries, I think that it's not so bad that the Japanese often buy new ones. At least the "old" ones aren't going to waste!

Have a great new year!

Jon: Hi and thanks for your comment!

As Roy mentioned, in Tokyo, cars are a luxury item rather than a necessity. In the countryside, people actually need them but not in the cities. For certain tasks though (like shopping at Costcos which are far from the stations and require you to carry large items), a car is a real blessing. However, the bottom line is that many city dwellers don't really "need" them.

As for traveling in Japan, there's no way around how expensive it can be, particularly if you want to traverse a lot of territory. I haven't stayed in a hostel before (I live in Tokyo and have been all over Tokyo and Yokohama, and visited Nikko, Osaka and Kobe but stayed in hotels or operated from my apartment) so I don't actually know what they cost.

The cheapest way to get your feet wet may be to come to one of the major cities and buy a rail pass while staying at the cheapest accommodation you can find, though, for someone who is 19 and probably doesn't have a lot of money, that can run into a large chunk of change, too.

You may want to pop by my friend Joseph's site ( as he has traveled extensively and may have better advice than I. For instance, he lived and worked on a farm in rural Japan for free room and board. He knows he ins and outs of cheap travel in Japan better than I. :-)

mjgolli said...

1% on a BMW?? Holy crap, going to live in Japan is becoming more and more of a draw for me. And BMW vans? I never knew they had vans. Saloons and sportwagons and the ridiculous SUV, sure, but vans? I'm shocked!

Back when I was young and stupid, I traded new cars around every two years or so. The negative equity sucked, of course, but I had few bills and no house payment. These were on loans about 3-5% or so, but still a very dumb move. Now that I am older and stupid, I'm driving a car that I like, thankfully, but I'm still essentially paying for a small part of the last three. I've had my current car for four years now and plan on keeping it for a few more years (unless I get a huge raise, which is NOT going to happen!)...all the trading around of decent cars is pointless, really.

If I had the opportunity to get a real, live, BMW for 1% I would probably lose my tiny little mind. But I can see if the inspection was going to be a huge problem, that could be a great incentive to change. We finally got rid of "E-Check" here in SW Ohio, which cost taxpayers huge sums of money, and the cost for "repairs" to cars that really didn't need repaired could be out of sight.

I swear if the bus went by my house I would take it rather than have a car...

Jon said...

Shari -

Ohh okay, I see. The cars would make much more sense, then. :P

Also, thank you so much for the link! I may have to pop on over to your friend's site as well, then. Yeah, so far my plans would be to fly to Tokyo (or Narita I guess), have a JR Pass, , go to a ticket reseller shop possibly in either Harajuku or maybe Ueno, go to a concert (it's in Yokohama at Yokohama Arena) if I find cheap enough tickets at one of those places, afterwards explore Japan in different cities and hostels for the next week//week 1/2, and have fun, haha. "for someone who is 19 and probably doesn't have a lot of money, that can run into a large chunk of change, too." -- definitely. I need money. :P I have about $1000 saved up right now, and by June (when I'd most likely want to go, as I'd be out of school and that's when the concert is), I could possibly have about $2000. But, there's also my gf, who has much less than me currently. Thank you for your time and kind words!

heng said...

The situation's kinda similar in Singapore. The tax system is structure suched that it's cheaper to get a new car every 2-3 years.

First of all, every car is slapped with something called an OMV, which is 140% of the original value, after which there is something else called PARF, which is another hefty 10-20%, after that you need to buy a title that gives you the right to own a car, which is easily $20k. The title only lasts 10 years, once that is up, you have to renew it at the current market price.

Cars older than 10 years have to pay an additional 10% road tax per year, incrementing by 10% every year. I don't remember what the ceiling is, either 150% or 200%.

In effect, what happens is that a perfectly fine car gets turned into scrapped metal every 2 years before the car 'loses its value'.

Also, a new car costs roughly what a small mansion would in Tokyo, 10million yen and up.

I don't know how they rigged the figures, but living costs in Singapore aren't that far off from Tokyo, and are in fact very much higher in some aspects.

Jon said...

Ohh I see. Thanks for all the info, Roy! :)