Wednesday, 30 September 2020

Buying a Used Car in Costa Rica

Buying a used car in Costa Rica is not different than buying a used car anywhere else, an experience that ranks right up there with a trip to the dentist. But, there is one major difference, IN COSTA RICA — USED CARS APPRECIATE IN VALUE!

For most North Americans they get a false sense of security when visiting a used car lot in Costa Rica, be it the corner lot or that of a high profile dealer, for their similarities those in the US or Canada.

While the typical used car lot is plain and simple, usually located in a high traffic area, used card lots at new car dealerships are typical of any car dealership north of the Mexico border. They have a spiffy sales floor, a workshop that you can eat off of and used cars that are supposedly of “better quality”.

- paying the bills -

One can understand that a “norte”(a term coined by a friend when referring to Americans and Canadians in Costa Rica) will probably feel that items like integrity and warranty are part of the package at the dealership lot, a better class of used car salesman than the corner not. NOT.

The truth is that buying a used car in Costa Rica, corner lot or dealership, one very important rule must be kept in mind, BUYER BEWARE! This is not Kansas, Dorothy.

Buying a used car in Costa Rica is a process. It is unlikely that you happen on a lot, find the car you want and drive home with it.

No, you have to respect the process and here some reasons why.

1. Good chance the car you have your eye on is not owned by the lot, but rather on consignment. The owner of the vehicle has given the car to the dealer to sell, the dealer gets a commission is and when the car eventually sells. The dealer has not stake in the price of the vehicle – the price it will sell or be bought for – just the commission. As such the price is always firm. Look for a car owned by the dealer – one he/she has a hard cash investment in, on this vehicle you can now negotiate.

- paying the bills -

2. Given that the vehicle being sold is probably not owned by the dealer, the process of transfer takes time. The dealer has to communicate your intent to purchase, that he/she has your deposit and for the owner’s lawyer to prepare the transfer docs. The next step is to visit the lawyer/notary to sign the documents. THIS IS WHEN AND ONLY WHEN YOU SHOULD PAY THE BALANCE OF THE PURCHASE PRICE. And then only after reviewing the car once again to ensure that it still is in the condition you made the deal on, that it has the same wheels, the radio, etc. Yes, you should have made a note of all of that – photos better – of the vehicle once you struck the deal.

Related: Used Car Evaluation Rises

3. The car is sold as is. In most cases the dealer knows what is wrong with the car but unlikely will fix the problems. No vehicular inspection certificate is required to transfer the a vehicle from one owner to another. That is, the mechanical problems, unless visible, are not fixed until the car comes up for the Riteve inspection.

4. The warranty is as good as the word of the dealer. In Costa Rica every purchase made at a retailer is covered by a 30 business day warranty. However, the warranty is to repair any problems, no obligation to replace or refund. So, once the car comes off the lot and it starts to develop problems, it could face sitting in the dealer’s shop waiting to get fixed, which unless pressed will not be a priority.  Thus it is very important to review the car very closely and factor in repairs as part of the purchase price.

A good practice is to negotiate the purchase price, now bring up the problems and renegotiate. In in the end it will be cheaper – in time and aggravation – for you to do the repairs than argue with the dealer later. A vehicle I bought for a few years back had a negotiated price of US$5.500. The vehicle had a serious transmission problem that the dealer figured would cost  US$1.500 to repair. I negotiated the price down to $4.000 and would do the repairs, that end up costing me only US$600 and only when the clutch was totally slipping. An important note, I was asked to sign a waiver of the 30 day warranty. Both I and the dealer knew that it was not valid, but it served ground for the dealer to then protest any repairs.

- paying the bills --

5. Do your due diligence. Many used cars are bought by dealers at US auctions, cars that have been written off up there and repaired here at less with cheap labour. An example, a dealer can buy a junker in Florida for a few hundred dollars, pay shipping, import taxes and repairs and still make 50% on his/her original investment. That is because a clunker that has no market in the US can sell for thousands of dollars here.

An example  is my 1975 Toyota Landcruiser, the original FJ40. In Costa Rica it sells for at least US$4,000, with some models up to double or more of that. And the vehicle is very rare to be seen for sale, let alone at a dealer’s lot. And when one does come up it is picked up quickly, within hours literally. The only dealer who has some on their lot is the Toyota at Toyotaland (yes, a real place with a big sign) in La Uruca. But these are fully reconditioned vehicles and can cost from US$15.000 to US$20.000.

6. Check the Fiscal value. Every value as a Fiscal value or value set by the Finance ministry used to determine the yearly property tax (included the annual Marchamo) and the transfer costs. This value is determined by the Ministerio de Hacienda and can increase – NOT DECREASE – in many cases, as it did this year. Increasing the Fiscal value is a way for the Hacienda to boost tax revenues.

Knowing the Fiscal value of the vehicle will allow you to budget you tax expense every December. If you want to argue this Fiscal value, it is a process of its own, which must be completed before November of each year or the new value – if reduced – is applied to the following fiscal cycle.

More:  Foreigners MUST BE LEGAL RESIDENTS To Drive in Costa Rica

7. Checking the Registro Nacional website before making your deal or at least putting down the deposit is recommended. This is where you get the information on the vehicle, more important any “gravemenes” – annotations to title, like a lien for a bank loan, a judicial embargo and unpaid traffic fines, for example. These items are really not your concern, for you are not the owner of the vehicle, BUT if you put up a deposit and the owner cannot or is unwilling to clear title, the sale is not going to go through. You won’t have a vehicle, dodged the bullet there, but now probably have to fight to get the deposit back. Most likely you will, but maybe weeks or more later. Checking title ahead of time can save you a lot of frustrations.

At the start I said used cars in Costa Rica appreciate in value. Typically in the “norte”, as many other parts of the world, a vehicle loses value as the year pass. However, in Costa Rica that does not occur. It may not go up in value, but it will keep its value. An example is my 1986 Mercedes 300SE which I bought used in 2008 for US$4.500. Today, almost five years later I can sell the car for that or maybe a little more, if I can find a buyer.

The high prices of gasoline makes my Mercedes not a car for most buyers, as the 3 Litre, 6 cylinder engine, cannot compete for economy as the three banger, 0.8 litre Chevy Spark.

The point is that used cards in Costa Rica, given proper and regular maintenance, are not only a mode of transportation, a status symbol for some, but a good investment for all.


"Rico" is the crazy mind behind the Q media websites, a series of online magazines where everything is Q! In these times of new normal, stay at home. Stay safe. Stay healthy.

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