The car tax Estonia has been collecting from vehicle owners since the start of the year is divided into an annual car tax and a registration fee. While the first installment of the annual car tax will not be collected until June, the state had received €18 million from one-time registration fees by the end of April. This is significantly less than expected.

"Last year, we forecast that registration fees could bring in about €137 million. It's true that many vehicle purchases happened at the end of last year and the numbers reflect that. Although registration fee payments have been increasing month by month, they will likely still fall short of the initial projections," said Evelyn Liivamägi, deputy secretary general at the Ministry of Finance.

After the first quarter, the car market has rebounded by 20 to 30 percent.

"There's definitely more activity — whether it's the spring or the sunshine, you can feel the seasonal effect. It's always been the case that the beginning of the year is quieter for the auto business. This time, it was expected to be especially quiet because of the car tax, but we can't complain. No, things aren't going great, but since April there's been a normal level of hustle and bustle," said Silver Havamaa, manager of Mobile autokeskus.

It's also a good time to buy a new car. Many who purchased vehicles at the end of last year to avoid the registration fee could now get a better deal.

"Most car dealership websites now have dedicated sections for discounts and promotions. And they're pretty substantial. If at the end of last year you might have avoided paying €1,000, now a €5,000 discount is common. Discounts of €10,000 are frequent, and for more expensive cars, price reductions of €20,000 or even more are available," explained Margus Pipar, editor at Autoleht magazine.

It's also a good time to buy used cars, where the effects of the car tax are even more apparent.

"Car dealerships in smaller towns are complaining that they haven't sold a single car in the first three months of the year. That's completely absurd and an anomaly," Pipar added.

The car market will likely pick up a bit more before the VAT increase, but will then settle down again.

"We've already gone through two VAT hikes before, and now — well, summer is usually quieter anyway, and with the recent implementation of the car tax and the upcoming VAT increase, the second half of summer will probably be slower," said Havamaa.

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