New car sales up in Estonia in anticipation of tax hikes | News

New car sales up in Estonia in anticipation of tax hikes | News

In September, nearly a quarter more new cars were sold compared to the same period last year. According to a representative from Amserv, the increase is attributed to the car tax set to take effect next year, as well as lower leasing interest rates.

According to statistics from the Estonian Car Dealers and Services Association (AMTEL), 2,125 new passenger cars were sold in September, which is a 23 percent increase compared to the same month last year.

The largest growth has been in the share of hybrid cars, which accounted for 53 percent of total sales.

Margus Nõmmik, a member of the board at Toyota dealer Amserv Auto, told ERR that several factors are driving this increase in sales. One of the key reasons is the upcoming car tax and registration fee. Nõmmik explained that those whose leasing contracts will end at the beginning or in the first half of next year, and who would need to replace their cars soon anyway, are speeding up the process.

“At one point, people were confused about whether the car tax would be implemented or not, and it became a secondary issue. However, it has come back into focus. The tax is definitely having an impact, but another factor is that today, there are inventories available, cars are being offered with discounts, and in cooperation with banks, leasing interest rates have also decreased,” Nõmmik listed as reasons for the sales growth.

Nõmmik also highlighted the increased interest in fixed-rate leasing, as people are reminded of the rising Euribor rate and the resulting increase in home loan costs.

The sales of used cars have also risen, and according to Nõmmik, this trend has been growing throughout the year.

However, the sales of electric cars have slightly declined. AMTEL statistics show that 107 electric cars were sold in Estonia in September, making up only 5 percent of total sales, while hybrid cars accounted for 1,130 units, or more than half of all new passenger car sales. Gasoline-powered cars represented 25 percent of sales, while diesel cars made up 16 percent.

The most popular car brand in September was Skoda, followed by Toyota in second place and Dacia rising to third. In terms of specific models, the Toyota Corolla, Skoda Octavia and Dacia Sandero were the top sellers.

According to Margus Nõmmik, Amserv’s most popular offerings have been SUVs. While the Toyota RAV4 had been a clear hit since 2019, the smaller Corolla Cross SUV has now gained popularity. Nõmmik attributes this to people wanting a vehicle with higher ground clearance and more space. Additionally, whereas families used to have two cars, many are now opting for one more practical vehicle.

“Our main focus today is on hybrids and plug-in hybrids. This reflects concerns over the upcoming vehicle tax and annual fees. Hybrids offer a clear advantage because of their significantly lower CO2 emissions, which makes them attractive,” Nõmmik explained. “It seems that our market isn’t quite ready for full-electric vehicles yet, as they’re still considered somewhat expensive. People also haven’t fully adjusted to the infrastructure and other requirements that come with them.”

Amserv expects strong sales to continue through the end of the year, as interest in new cars remains high and inventory is available. However, Nõmmik predicts a slowdown early next year, which often happens when new taxes are introduced.

“We expect the beginning of next year to be quieter,” Nõmmik forecasted, adding that the new car tax, while not as extreme as initially feared for standard vehicles, will be quite significant for certain models.

During the first nine months of this year, a total of 15,827 new passenger cars were sold in Estonia, which is 9 percent less than in the same period in 2023, according to AMTEL data.

Unlike passenger cars, the sale of commercial vehicles continues to decline. In September, nearly a third fewer new commercial vehicles were sold compared to the same month last year. Over the first nine months of this year, sales of commercial vehicles fell by nearly 11 percent.

Starting next year, a two-part vehicle tax will come into effect. In addition to the annual tax, which consists of a base component, a CO2 emissions component and a gross weight component, vehicle owners will also need to pay a registration fee. Initial calculations suggest that an ordinary C-segment family car, such as the Skoda Octavia, will have an annual car tax of between €50-80, depending on the engine, while something like a second-hand Volkswagen Multivan people carrier could run the owner more than €500 annually. Their respective registration fees would be between around €700 and €1,800.

Furthermore, the VAT rate will increase by 2 percentage points to 24 percent, effective July 1, 2025.

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