I Wondered Why Cars Are So Expensive In Here

[falang07]

http://www.boi.go.th/english/how/tax_rates_and_double_taxation_agreements.asp

Excise Tax

e.g. Pickup passenger vehicles (PPV) with the displacement of over than 3,250 -- 50% Wow!

Passenger car with the displacement of over than 3,000cc or with an engine power of not over than 220 horse power (HP) -- 50% too

Best value seem to be Vehicles with double cap With the displacement of not over than 3,250cc -- 12%

[Orac]

The automotive industry is very important to Thailand so they feel there is a need to protect themselves from foreign imports thus making imports more expensive in relation to those made here in Thailand.

It is not uncommon for business or other groups such as unions to feel threatened by foreign competion and for governments to protect them. Other examples would be the steel industry in the USA where duties for some products from China reach 450 % (steel drilling tubes) or the UK which for some reason need to protect the ring binder mechanism industy from the evils of Thai competion and impose an addition 17.2% duty on products from there.

[PattayaParent]

Taxes

[Spoonman]

What is "vehicles with double cap" ?

[givenall]

Thanks god they are expensive. Can you imagine what the trafficas bas bad it is what would be if more people could afford to buy cars

[Pib]

The automotive industry is very important to Thailand so they feel there is a need to protect themselves from foreign imports thus making imports more expensive in relation to those made here in Thailand.

Even vehicles made in Thailand are expensive. The majority of vehicle on Thailand roads are made right here in Thailand like Toyota, Honda, etc. (about half exported; half sold in Thailand), but the govt places very high taxes on these made in Thailand vehicles (kinda like a luxury tax)...while this tax is lower than import taxes paid on vehicles truly made outside Thailand, the tax is still high for made in Thailand vehicles. It's candy (taxes) for the govt.

But the everyday Thai don't really complain...they just smile and say there is nothing they can do about it...so nothing really changes. The only real time you really see changes is right after elections when some of the election promises are fulfilled (while other promises don't) or during election year when the party in power effectively buys votes through major populist changes like through the use of subsidies/price controls.

Edited July 25, 2011 by Pib

[london]

Because the income tax system here is almost voluntary, it is a way of ensuring the the Government has income.

This is true of many Asian economies.

Also, cars are a status symbol.....if you have the money to buy a car, in particular a new car, then you are wealthy. The fact that the government is making "x" amount in taxes is really irrelevant to the average buyer.

It works for the government.

[kokesaat]

I'm surprised at the number of expats who don't understand or aren't aware of the tax code here on vehicles. I often present this scenario to an inquiring newly arrived mind:

You're at a car dealer in the US. You see a Honda Jazz for $15,000, everything except tax. With 8% sales tax, the car will cost $16,200. A few years later, you get a better job and want to buy an Accord. The Accord costs $25,000, everything except tax. But the tax on the Accord is 35%, so the final cost is $33,750. Would you buy the Accord and pay the higher tax? Not me......but that's what people are doing here on a daily basis.

[Atmos]

Seen one of the locals getting around in a new Porsche Cayenne, was told he paid 12 million but can't confirm that; the prestige of owning such a vehicle in rural Chanthaburi is maybe not so high as a big city, as the Porsche name is not so well known.

Quite a statement though - and among those 'in the know' he has one-upped the many Merc drivers locally.

Don't know what the (eg) Toyota equivalent would be, but imagine one could buy a few of them for 12m.

Edited July 25, 2011 by Atmos

[jybkk]

A few weeks ago, they were showing CItroen DS4 in Paragon, trying to sell them around 1.5 million.

These are some kind of super compact/trendy cars, not the cheapest but with a 1.6L engine, you can't call them luxury either.

When I checked their price in Europe, I was stunned to see that it was half of what they were sold in Thailand.

I've had the discussion about car ownership and use with many Thais, especially Bangkokians, and there was not much rationality involved. Many were arguing that it was the cheapest of their options, but a few minutes of budget calculation would suffice them to realize that it's a it's a bottomless pit for their money compared to simply use a mix of public transportation, taxi and car rentals.

Car is one of the most important status symbol for Thais, and they are ready to pay a lot for it, even if they actually don't need that car. Manufacturers and government understood that very well.

[Nisa]

I'm surprised at the number of expats who don't understand or aren't aware of the tax code here on vehicles. I often present this scenario to an inquiring newly arrived mind:

You're at a car dealer in the US. You see a Honda Jazz for $15,000, everything except tax. With 8% sales tax, the car will cost $16,200. A few years later, you get a better job and want to buy an Accord. The Accord costs $25,000, everything except tax. But the tax on the Accord is 35%, so the final cost is $33,750. Would you buy the Accord and pay the higher tax? Not me......but that's what people are doing here on a daily basis.

I'm assuming you meant to say that in Thailand, not the US, the tax is different for different classes of vehicles.

I am from the US and sales tax is the same on each car regardless of price or model and in addition to the states sales tax there is usually about a 2.5% lic & registration fee. There is also a destination fee added that is often about $500. So, in California the state sales tax is 8.5% & with the DMV fees of about 2.5% the usual tax on a vehicle is 11% minus any city tax that is added. Oh, and there is also a Gas Guzzling tax .. if the car doesn't have an average rating of 22.5 MPG or better, you will pay an additional $1000 to $7500 depending on gas mileage. There also use to be a Luxury tax of like 3% on vehicles over 35 or 40K but I don't think they do this anymore or they raised the price qualification much higher as I haven't scene this lately.

As for vehicles being more here, I have not noticed this but haven't looked at the imports. I've never done an exact comparison between here and the US but I was shopping for a lower end Honda or Toyota last year and was kind of surprised at how inexpensive they where. But in the end I just couldn't see a real benefit to owning a car in Bangkok ... especially considering there are few places you can go in BKK that have easy parking beyond the malls. And even if I was to have a 10,000 baht a month payment (just for the loan), I could take a taxi to the beach every week-end and still pay less than the car payment.

I also noted that dealers (especially Honda) are reluctant to budge in terms of discounts in Thailand. But I believe this is also the case in the US for many lower prices cars (under $20k) now. Not sure if they do rebates here but I when I was looking there was none to be found.

[Nisa]

Question ... Are most Thais (Honda/Toyota drivers) who are driving new cars leasing or buying them?

When casually looking at new vehicles a year ago, the dealers had handouts with what your payment would be with X% down. I think these payment amounts were also in the manufacturer brochure. The payments seemed incredibly low to me and I never really got a straight answer regarding lease vs. buy but was told the car would be mine when paid off. I even think I did a quick total of the payments and they barely added up to the total vehicle cost but there seemed to be no mention of any kind of residual payment at the end as there would be for a lease if you wanted to keep the car.

Anyway, just curious if interest rates are incredibly low or if there are leases and there is a buyout option at the end.

[katabeachbum]

Question ... Are most Thais (Honda/Toyota drivers) who are driving new cars leasing or buying them?

When casually looking at new vehicles a year ago, the dealers had handouts with what your payment would be with X% down. I think these payment amounts were also in the manufacturer brochure. The payments seemed incredibly low to me and I never really got a straight answer regarding lease vs. buy but was told the car would be mine when paid off. I even think I did a quick total of the payments and they barely added up to the total vehicle cost but there seemed to be no mention of any kind of residual payment at the end as there would be for a lease if you wanted to keep the car.

Anyway, just curious if interest rates are incredibly low or if there are leases and there is a buyout option at the end.

usually a lease is to zero value, and ownership automaticly transfered to you when all terms paid

unless its a ballon finance, with last term as a compulsory buyout, not very common tho

[Tokay]

This is a good thing. Keep them on scooters... less traffic and faster clean up after an accident.

[thaimate]

What amazes me is that they buy second hand cars they cost almost as much as new.

[jayceebee]

What is "vehicles with double cap" ?

Double cab pickup truck?

[joker7]

You ever wonder why they tax BMW's and Merc's so much ? Only rich Thai's can afford them. So they get lots of face when they drive around in their beamer. You imagine what would happen if they change the tax laws and suddenly lots of average Thai's are driving BMW's like in the UK. Would never happen. Some Thai's spend more on their car than they do on their house !

[parallaxtech]

Is it a fact that Thais actually pay this absurd tax? There is a huge smuggling ring here as well as a grey market. I saw an 18-yr-old Thai jetski-mafia-type driving a BMW the other day and I asked him where he got the 10MB for it and he just smiled and said it was less than 1MB! If a farang tries this they run the risk of it getting confiscated. Why would anyone in their right mind pay 10MB for a 2MB car?

Edited July 26, 2011 by parallaxtech

[ericthai]

Question ... Are most Thais (Honda/Toyota drivers) who are driving new cars leasing or buying them?

When casually looking at new vehicles a year ago, the dealers had handouts with what your payment would be with X% down. I think these payment amounts were also in the manufacturer brochure. The payments seemed incredibly low to me and I never really got a straight answer regarding lease vs. buy but was told the car would be mine when paid off. I even think I did a quick total of the payments and they barely added up to the total vehicle cost but there seemed to be no mention of any kind of residual payment at the end as there would be for a lease if you wanted to keep the car.

Anyway, just curious if interest rates are incredibly low or if there are leases and there is a buyout option at the end.

usually a lease is to zero value, and ownership automaticly transfered to you when all terms paid

unless its a ballon finance, with last term as a compulsory buyout, not very common tho

Sorry to tell you, but no a lease is never to zero balance, a loan is to zero balance. A lease is more or less long term rent. At the end of the lease you have an option to either buy the car at a set fee or return the car. I have done over a dozen leases in the US in the past and never ever is it to a zero balance on the car value. There are also fees, you can only have X amount a mileage per year, any more than normal wear and tear etc. etc. I used a lease option for my company in the US as it was all tax deductible at the time.

[samran]

What amazes me is that they buy second hand cars they cost almost as much as new.

Which is one of the reasons why the high initial price isn't so bad when you think about it.

Sell a car in the west, and it has hugely depreciated the second it goes out of the dealers lot. Not in Thailand.

We've purchased a car in Australia which was 18 months old, and was 40% cheaper than new.

In Thailand, we've driven around second hand vehicles which we've purchased in good condition and then sold them 2 years later for not much less that we got them for. Ex. fuel and maintenance (the latter very cheap in Thailand), that is almost free driving.

[falang07]

In Thailand, we've driven around second hand vehicles which we've purchased in good condition and then sold them 2 years later for not much less that we got them for. Ex. fuel and maintenance (the latter very cheap in Thailand), that is almost free driving.

And I wonder when will those monkeys buying second hand cars for these prices realize this...

[newtronbom]

The automotive industry is very important to Thailand so they feel there is a need to protect themselves from foreign imports thus making imports more expensive in relation to those made here in Thailand.

It is not uncommon for business or other groups such as unions to feel threatened by foreign competion and for governments to protect them. Other examples would be the steel industry in the USA where duties for some products from China reach 450 % (steel drilling tubes) or the UK which for some reason need to protect the ring binder mechanism industy from the evils of Thai competion and impose an addition 17.2% duty on products from there.

Cars have always been expensive to buy here. 25 years ago, there were no car factories here at all, yet due to high import duty they were very expensive compared to the west. I have asked why many times since then and the only constant reply I have had, is it is done to keep the numbers down buy putting them out of the reach of the normal guy. This did work for many years, but not the last 10, as we can all see. I would be interested to know the ratio of imports to local made 5 years ago, and the figures today. Ferrari, Porsche and other exotics are a daily sight now, though anyone without a death wish would never drive them on the roads here as they were designed to be driven! This is overall not a poor country any more. Common to see 2, 3 or 4 cars per home in the gated villages these days. Even more in many wealthy homes!

[newtronbom]

What amazes me is that they buy second hand cars they cost almost as much as new.

That will change soon I think. I have seen the same cars sitting in some of the big lots for over a year. Lots of people defaulting on time payment too. Pure economics must force them to drop the prices sooner or later. Surely can't just keep buying? Has to be good profit in it still though, as there are plenty of "cars for cash" on the tele. Beats me where all the profit is gained though, as the margins are small. Perhaps sheer volume of turnover like a supermarket does it. AS for the high price being kept to only allow the rich to afford them, it's the same where we come from. Your average guy can't afford a Roller, Ferrari or Lambo back home either. Mercs and Beemers are just another choice along with the Jap stuff. Anyway. Who would buy an old rust bucket when they could afford a new car?

[katabeachbum]

Question ... Are most Thais (Honda/Toyota drivers) who are driving new cars leasing or buying them?

When casually looking at new vehicles a year ago, the dealers had handouts with what your payment would be with X% down. I think these payment amounts were also in the manufacturer brochure. The payments seemed incredibly low to me and I never really got a straight answer regarding lease vs. buy but was told the car would be mine when paid off. I even think I did a quick total of the payments and they barely added up to the total vehicle cost but there seemed to be no mention of any kind of residual payment at the end as there would be for a lease if you wanted to keep the car.

Anyway, just curious if interest rates are incredibly low or if there are leases and there is a buyout option at the end.

usually a lease is to zero value, and ownership automaticly transfered to you when all terms paid

unless its a ballon finance, with last term as a compulsory buyout, not very common tho

Sorry to tell you, but no a lease is never to zero balance, a loan is to zero balance. A lease is more or less long term rent. At the end of the lease you have an option to either buy the car at a set fee or return the car. I have done over a dozen leases in the US in the past and never ever is it to a zero balance on the car value. There are also fees, you can only have X amount a mileage per year, any more than normal wear and tear etc. etc. I used a lease option for my company in the US as it was all tax deductible at the time.

I am sorry, I wasnt aware we where talking leases in USA.

In Thailand a lease/carfinance is usually to zero value as above, no fee in the end, no limits on use within Thailand. Car is registered with financecompany as owner and if financecompany goes belly up you loose car, thus its considered to be a lease. You are registered as user in reg book.

I am on my third one in my name, and 7-8 in my GF name, all in major SET financecompanies

[katabeachbum]

Excicetax for Thailands best selling saloon, Toyota Vios at 600k baht on the road, is approx 100.000 baht, ad 7% VAT.

Excicetax for Thailands best selling pickup, Toyota Vigo at 700k baht on the road, is approx 18.000 baht, ad 7% VAT.

Dealers have low markup, so do not expect any discount, but 1st year Insurance and other freebies can be had on occasions

Both cost approx 14.000 baht/year to Insure 1st class valid for any driver, unlimited milage, 2.000 baht self deductable each accident

Both have an annualr road tax of approx 700 baht

Both have a secondhand value of approx 60-65% after 3 years/60k km

Car ownership in Thailand is inexpensive

More to be learned in ThaiVisa Motoring Forum

[aussiebebe]

The automotive industry is very important to Thailand so they feel there is a need to protect themselves from foreign imports thus making imports more expensive in relation to those made here in Thailand.

It is not uncommon for business or other groups such as unions to feel threatened by foreign competion and for governments to protect them. Other examples would be the steel industry in the USA where duties for some products from China reach 450 % (steel drilling tubes) or the UK which for some reason need to protect the ring binder mechanism industy from the evils of Thai competion and impose an addition 17.2% duty on products from there.

Cars have always been expensive to buy here. 25 years ago, there were no car factories here at all, yet due to high import duty they were very expensive compared to the west. I have asked why many times since then and the only constant reply I have had, is it is done to keep the numbers down buy putting them out of the reach of the normal guy. This did work for many years, but not the last 10, as we can all see. I would be interested to know the ratio of imports to local made 5 years ago, and the figures today. Ferrari, Porsche and other exotics are a daily sight now, though anyone without a death wish would never drive them on the roads here as they were designed to be driven! This is overall not a poor country any more. Common to see 2, 3 or 4 cars per home in the gated villages these days. Even more in many wealthy homes!

The thing about certain Chinese steel products is that the US produces could prove that the Chinese were selling below cost so protectionist measures were set in place. Car ownership has rocketed in Thailand after smaller eco-cars were introduced. In principle, great idea for Thai gov to offer tax breaks but in practice, few motorists have down-traded and all that's happened is lower-income people have become motorists thus adding significantly to congestion in my opinion over the past two years especially.

[Nisa]

Question ... Are most Thais (Honda/Toyota drivers) who are driving new cars leasing or buying them?

When casually looking at new vehicles a year ago, the dealers had handouts with what your payment would be with X% down. I think these payment amounts were also in the manufacturer brochure. The payments seemed incredibly low to me and I never really got a straight answer regarding lease vs. buy but was told the car would be mine when paid off. I even think I did a quick total of the payments and they barely added up to the total vehicle cost but there seemed to be no mention of any kind of residual payment at the end as there would be for a lease if you wanted to keep the car.

Anyway, just curious if interest rates are incredibly low or if there are leases and there is a buyout option at the end.

usually a lease is to zero value, and ownership automaticly transfered to you when all terms paid

unless its a ballon finance, with last term as a compulsory buyout, not very common tho

Sorry to tell you, but no a lease is never to zero balance, a loan is to zero balance. A lease is more or less long term rent. At the end of the lease you have an option to either buy the car at a set fee or return the car. I have done over a dozen leases in the US in the past and never ever is it to a zero balance on the car value. There are also fees, you can only have X amount a mileage per year, any more than normal wear and tear etc. etc. I used a lease option for my company in the US as it was all tax deductible at the time.

I am sorry, I wasnt aware we where talking leases in USA.

In Thailand a lease/carfinance is usually to zero value as above, no fee in the end, no limits on use within Thailand. Car is registered with financecompany as owner and if financecompany goes belly up you loose car, thus its considered to be a lease. You are registered as user in reg book.

I am on my third one in my name, and 7-8 in my GF name, all in major SET financecompanies

I think we may be confusing terminology. A Lease, in a sense, is nothing more than a rental agreement that includes a buyout option. What you are describing is a standard financed purchase. Leases, at least in the US, are tax deductible as an operating expense and why companies often choose to lease. However, the vast majority of the public leasing are simply doing so because it requires less money to start a lease (no down payment, since you are not buying it) and monthly payments are significantly less because you are only paying for the use of the car. At the end of the lease you have the option to buy off thee vehicle for the residual amount. In a sense, if you decide to purchase the care after the lease, it is like making the down payment at the end but you typically end up paying much more than if you simply purchased the vehicle.

Not sure about Thailand but leasing companies and finance companies are usually one in the same ... a bank of financial institution. There going out of business would simply means loans and leases would be passed off to the purchaser of the financial institutions assets. A lease vs. finance doesn't have anything to do with what happens to the financial institution. In both cases you have a contract and in both cases you are not the title holder of the vehicle unless all financial obligations to the financial institution are met. In reality a lease is also financing (there is an interest rate) but you simply are financing the use of the vehicle as opposed to the purchase of a vehicle.

A lease offers a significantly lower payment and was why I was wondering if cars are typically leased in Thailand or if the interest rate on a purchase is significantly lower since payments seem to be fairly low..

Edited July 26, 2011 by Nisa

[katabeachbum]

I think we may be confusing terminology. A Lease, in a sense, is nothing more than a rental agreement that includes a buyout option. What you are describing is a standard financed purchase. Leases, at least in the US, are tax deductible as an operating expense and why companies often choose to lease. However, the vast majority of the public leasing are simply doing so because it requires less money to start a lease (no down payment, since you are not buying it) and monthly payments are significantly less because you are only paying for the use of the car. At the end of the lease you have the option to buy off thee vehicle for the residual amount. In a sense, if you decide to purchase the care after the lease, it is like making the down payment at the end but you typically end up paying much more than if you simply purchased the vehicle.

Not sure about Thailand but leasing companies and finance companies are usually one in the same ... a bank of financial institution. There going out of business would simply means loans and leases would be passed off to the purchaser of the financial institutions assets. A lease vs. finance doesn't have anything to do with what happens to the financial institution. In both cases you have a contract and in both cases you are not the title holder of the vehicle unless all financial obligations to the financial institution are met. In reality a lease is also financing (there is an interest rate) but you simply are financing the use of the vehicle as opposed to the purchase of a vehicle.

A lease offers a significantly lower payment and was why I was wondering if cars are typically leased in Thailand or if the interest rate on a purchase is significantly lower since payments seem to be fairly low..

I fail to see how American lease conditions and terminology affect Thai lease conditions. I have made a picture of how it is in Thailand.

Added info would be,

typical downpayment is 25%,

and interest is fixed for the whole financeperiod and usually 2-3,5% of the initially borrowed/leased amount

To put it simple, sticker price, ad 6-11% finance cost over 4 years, and youv got the cars total price to become owner in 4 years

Lease amounts are deductable for tax reasons both for individuals and co ltd

[WarpSpeed]

The automotive industry is very important to Thailand so they feel there is a need to protect themselves from foreign imports thus making imports more expensive in relation to those made here in Thailand.

They're all "foreign imports" just assembled here and still of foreign corporations as Thailand has no automobile manufacturers of their own. By any definition it's silly economics..

[katabeachbum]

The automotive industry is very important to Thailand so they feel there is a need to protect themselves from foreign imports thus making imports more expensive in relation to those made here in Thailand.

They're all "foreign imports" just assembled here and still of foreign corporations as Thailand has no automobile manufacturers of their own. By any definition it's silly economics..

to qualify as a Thai made car, +80% of the parts its made from must be manufactored in Thailand. If not, its a CKD like BMW, Benz and Volvo. They are assembled here. The rest are made here, from mainly Thai made parts including bodys.

hmm, silly economics, that must be US car makers who would all be dead by now without US tax payers money.

Car makers in Thailand make money, and employ a few million people. All are owned at least 51% by Thai nationals

Thailand is the largest pickup exporter in the world. In addition they export parts (including bodys) to assemble another 30% of their pickup output in other countries. Thai plants cant presently handle larger output

Corporates like Nissan choose Thailand as one of 3 plants to manufactor their word model March/Micra

Canada does not have any brand name of their own either. Huge automotive industry tho