The car tax coming into force next year should not be a reason to hastily change your car. There should be a more serious reason, such as the condition of the car or the needs of the family, writes Veiko Karu, CEO of Auto Bassadone. /nginx/o/2021/10/15/14140209t1h642f.jpg)
Used cars. Illustrative photo. Photo: Elmo Riig
The car tax coming into force next year should not be a reason to hastily change your car. There should be a more serious reason, such as the condition of the car or the needs of the family, writes Veiko Karu, CEO of Auto Bassadone.
Late last week, President Alar Karis approved the vehicle tax law. Since its preparation, there have been speculations in the media and the automotive market that the law will lead to a car buying boom in the second half of 2024, as consumers start changing cars en masse before the tax is introduced. As a representative of the automotive sector, I believe there is no reason for panic buying. Why?
Consumers who have a vehicle in good condition and have not yet considered trading it in should not do so, as given the tax conditions, there will be little or no benefit from trading in the vehicle for a new one.
Until now, Estonian consumers have preferred to change cars quite often, every few years, so the desire to change cars in fear of the tax in order to save on the registration fee is understandable. However, in light of the introduction of the car tax, it is worth reconsidering your habits and seriously considering whether a new car makes more economic sense than an old one.
According to EU standards, new cars must be as environmentally friendly and safe as possible, and the difference in weight is minimal, so there is no significant gain in terms of tax on new cars. In addition, the tax base depends on the age component, and the tax decreases as the age of the car increases. Therefore, you should not change your car this year just because of the introduction of a new tax, there must be a more serious reason for this. For example, the condition of the car or the needs of the family.
However, those who are already thinking about changing their car in the near future or should do so in the coming year should consider the option of buying a new vehicle. The reason lies in the registration fee, but in two options.
So far we have talked about how, from next year, the registration tax will be added to the purchase price of a car. However, it is important to understand that this will have an equivalent effect on the process of selling an existing car. If the car is sold this year, the new owner will not have to pay the registration tax.
If the sale is postponed to the following year, the buyer will have to pay a registration tax on the first change of ownership. The latter can make the process of selling a used car longer or even more difficult to buy a new one, since the old one is harder to get rid of.
As an expert in the automotive sector, I believe that the car tax will change consumer behavior and people will start thinking more about the need to buy a car. However, we should not expect the market to change much.
