More new cars have been sold in Estonia this year, with November sales up more than 25 percent on year. But most second-hand cars are bought for cash as high interest rates are putting people off leasing contracts.
A multi-year slump in car sales caused by several different crises ended this year, said Margus Nõmmik, head of Toyota dealer Amserv.
"We might say we were anxious in terms of whether the VAT hike [from 2024] would cause a sales boom. But that does not seem to be the case. It is the first year of upturn after crisis years. We might say that manufacturing and supply problems have been overcome and we can breathe a little easier," Nõmmik said.
Sale of new cars has grown 9 percent this year, which came to 28 percent in November year-over-year. But soaring interest rates mean people less often opt for leasing contracts.
Bank of Estonia economist Taavi Raudsaar said that leases are down 3 percent in terms of volume and 9 percent in terms of number of contracts for the first 11 months of 2023 compared to the previous year.
Seventy-five percent of new and 45 percent of used cars are leased. Leasing statistics also shows that people are paying more for cars.
"The average leasing sum has grown 5-6 percent from last year. This reflects cars having become more expensive. Especially new cars," Raudsaar said.
"It's true that the prices of new cars grew quite a lot after the pandemic and the start of the war. But I think this has peaked now and we might see stabilization," Nõmmik said.
The growing Euribor rate and more expensive lease contracts meant that dealers had to lower their profit margins this year. "Interest rates make for a painful topic and people's expenses have grown considerably," Nõmmik remarked.
Car sales are expected to pick up in the first half of 2024 as companies at least will try to renew their fleets before Estonia's car tax lands, presumably in 2025.
Data from the Estonian Vehicle Dealers and Services Association (AMTEL) suggests 1,827 new cars were sold in November, up 27.9 percent on year. During the first 11 months of 2023 dealers shifted 21,007 new cars for an annual increase of 9 percent.
Consumers bought 129 electric vehicles in November, which made up 7.1 percent of all cars sold. Hybrids counted for 45.3 percent, gasoline cars 34.2 percent and diesel cars 13.1 percent of sales. Mid-size SUVs and C-segment cars were the most popular.
Toyota (484), Skoda (274) and KIA (145) were the most popular makes in November.
Editor: Barbara Oja, Marcus Turovski