Sunday 26 June 2022

Costa Rica: Used Cars Lose Appeal

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 The main drag into Grecia from the Interamericana Norte (Ruta 1) is home to at least 53 used car dealers. To diversify its offer, many became autoboutiques or are converted into a detailing workshp. They also offer financing to attract customers but are finding ever more difficult to compete with new car offers. Photo Melissa Fernandez, La Nacion

The main drag into Grecia from the Interamericana Norte (Ruta 1) is home to at least 53 used car dealers. To diversify its offer, many became autoboutiques or are converted into a detailing workshop. They also offer financing to attract customers but are finding ever more difficult to compete with new car offers. Photo Melissa Fernandez, La Nacion

QCOSTARICA – The five kilometres to the town of Grecia is said to be the used car capital of Costa Rica, with used car dealers on the left and right of the street, signs attracting customers to good deals and salespeople waiting patiently for customers who are increasingly becoming scarce.

If you are looking for a used car, look no further to Grecia.

But, attractive offers for new cars and their attractive financing options: increased credit options for purchase of new vehicles, longer  terms (time to pay), low interest rates and stability in the dollar exchange has hurt the used car market.

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Also, the policies of the recent governments, lobbied by the new car dealers, as alleged by used vehicle importers, took effect, hitting the used car sector with a heavy blow.

In the past five years used cars lost 24% percentage points of market share, a market lacking attractive incentives for imports and being at a competitive disadvantage to the new vehicles market.

The Finance Ministry (Ministerio de Hacienda) released data published by La Nacion which shows that the used car segment went from having a 54% market share in 2010 to a 30% share in 2015. Meanwhile, imports of new cars rose by 35% (going from 37,866 to 51,249 units) between 2013 and 2015.

In 2013, Hacienda reduced, in stages, the rate of selective consumption tax for used cars more than three years old. But as this tax went down, the import tax value of cars rose.

“Affected (due to these taxes) is the consumer. How is it possible that a 2005 car enters the country costing the same as a 2016?” said Jeffrey Valerio, owner Autos Jeff, one of the used card importers with years of operating in Grecia.

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According to Valerio more that 20 used car dealers have closed, while others keep reducing their operations, lower volume of vehicles and lesser staff. Valerio himself is now down to two employees from twenty.

Deputy Minister of Energy, Irene Cañas, says the aim of the Luis Guillermo Solis administration is not to limit the entry of used vehicles, but that of inefficient cars. The minister explained the prohibition in the law occurs when the vehicle has already been declared a total loss in their country of origin.

In fact, six out of ten of used vehicles passing through customs in 2014 were at least 10 years old.

The minister added that her office, in conjunction with the authorities of Ministry of Public Works and Transport (MOPT), seek ways to limit the entry of cars by type of technology (efficiency in fuel consumption, etc.) and not by age.

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We do not want to limit the ability of a family to buy a 2004 car if and when it is as efficient as a 2010,” stressed deputy minister Cañas.

Source: La Nacion

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