Economic slump, decline in new immigrants hits 2 Cheap Cars, profit falls 47% to $3.3m

2 Cheap Cars has reported a steep decline in net profit as market conditions bite the car dealer. Photo / Brett Phibbs

New Zealand’s continued economic downturn, a sharp fall in immigration and consequent softer market demand has driven a 47% drop in profit for 2 Cheap Cars.

The company reported total revenue of $81.9 million with 7675 cars sold in the year to March 31, down 6% compared to $86.7m in 2024.

Included in the total revenue was $1.7m related to carbon credits generated and retained in prior reporting periods, but not previously recognised because of uncertainty regarding their realisation.

The business’ gross margin decreased by 14% to $17.8m, driven by aggressive discounting across the used car sector.

But the biggest impact was on its net profit, which dropped from $6.2m in 2024 to $3.3m in 2025.

2 Cheap Cars chief executive and founder, David Sena, said that despite the challenging market conditions, the company’s fundamentals remained strong.

“We’ve never seen a more turbulent market than this, and there’s no question that trading is tough.

“However, we are a resilient business, underpinned by maintaining prudent inventory levels, a laser focus on cost control, and optimising our retail footprint.”

2 Cheap Cars’ operating expenses rose by 10% year-on-year, driven by significantly higher costs for listing fees on third-party platforms such as Trade Me.

To combat the issue, the company is increasing investment into “owned” digital channels and will explore potential new third-party platforms to reduce long-term customer acquisition costs.

Operating expenses were also impacted by additional vehicle storage requirements because of increased in-house activity and broader inflationary pressures on rates and utilities.

The company said the first two months of the 2026 financial year for the business had been challenging, although no financial data was reported.

The business said it was confident that as the cumulative impacts of declining interest rates and greater access to consumer credit take effect, conditions will improve.

A key driver of expanding its retail footprint will be the addition of a new 5000sq m flagship site at Sylvia Park, scheduled for August 2025.

With capacity for 150 cars, the business believes the site will materially increase retail capacity and enhance brand visibility in one of Auckland’s highest-traffic zones.

2 Cheap Cars chairman Michael Stiassny said that while the company remains well-positioned to benefit from an upswing in consumer confidence, it would be reassessing its strategy.

“As the economic environment eases and consumer confidence returns, the used car sector is one of the immediate beneficiaries. That’s simply because affordable, reliable cars are a necessity, not a luxury.

“However, the company is realistic about the need to continually flex to meet the market and to fine-tune operations to improve profitability. The board and management are focused on ensuring the strategy remains fit for purpose and will not shy away from making changes considered necessary to create stronger shareholder value.”

A final dividend of 2.97 cents per share (cps) was declared by the company’s board, bringing the total dividend over the financial year to 6.03 cps.

Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.