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People not yet rushing to buy cars in fear of looming VAT hike and car tax

New cars.
New cars. Source: Siim Lõvi /ERR

Despite solid November figures, new car sales have not reached the pre-pandemic level in Estonia. The looming VAT hike and the possible arrival of a car tax in 2025 have not caused people to rush into buying cars.

November saw sales of new cars grow 28 percent year-over-year to 1,827 vehicles sold. Dealers believe the spike is mainly down to last year's low reference base, while discounts also have a role to play.

Over 21,000 new vehicles have been sold in Estonia so far in 2023, up 9 percent compared to the same period last year.

Meelis Telliskivi, head of the Estonian Car Dealerships and Services Association (AMTEL), said that while sales are up, the market has not bounced back to pre-Covid levels.

He said that while November sales figures are above recent years' results, dealerships shifted over 2,000 cars in November in 2017, 2018 and 2019.

Raimo Koppel, executive manager of Viking Motors, said that while dealerships have plenty of vehicles in their warehouses and are offering discounts, the high Euribor rate is keeping buyer interest down.

Almost every other vehicle sold in November was a hybrid, while full electric vehicles made up 7 percent of sales. Raimo Koppel believes this could climb to 15 percent in the coming years.

Things are different on the used cars market.

"When it comes to second-hand vehicles, diesel is king and its relative importance is growing. People also tend to buy larger used vehicles," Telliskivi said.

Janek Eskor, head of sales for Topauto, suggested that next year's VAT hike (from 20 percent to 22 percent) and the possibility of a car tax landing in 2025 are not affecting sales at the moment.

He added that customers have postponed decisions to buy to wait and see what the new vehicle registration fee will be.

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Editor: Mirjam Mäekivi, Marcus Turovski

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