Bt100,000 Excise Tax Cut For First-Car Buyers

[transam]

If they were to check on the Houses, they wouldnt lend enough to buy a tea pot. A fair few will go AWOL, or catch fire .Another half wit populist idea from the crook.

Sorry but l just do not understand most of your posts.

Please, those who do, can you do a translation for a few of us, ooops, or just me.

[jamora]

Used car tents owner must be steaming

Now the one year old Yaris with 60000km on it will be difficult to sale with just a 40000 THB price difference against a new car.

Wandrinstar, I think the engine size doesn't matter for pickup trucks, only for sedan.

Noone steaming, because they (we) can rent those cars for one year and still get a good price.

Anyway, the finance approval for a "first time car buyer" will be very difficult or almost impossible, because if that "first time car buyer" doesn't pay the monthly rates anymore, after one year when he collected the refund, the finance company have to take (reposess) the car back and can not sale (tranfer ownership) for another 4 years, which is, in other words, a total loss for the finance company. They will propharely sit on huge mountains of unpaid cars, if they loan money to first time car buyers.

And remember the plan was only to help for the poor local first time car buyers (i gess not for foreigners) and if now some farang have the "glory idea", try to finance a new car in his 70' year old grandmother in law or in a bargirl's name, they will not pass the finance requirements either (6 months clean bank records amd clean employment). So the benefits are maybe only for cash buyers. Foreigners can buy in "bg's" name in cash, so the chances that the car will be gone on the next day will be quite high.

My wife is working in the banking sector, and she told me that most banks will adjust the loans, so first time buyers who can use this tax rebate will have to make a larger down payment and probably also pay higher interests, due to the higher risk of NPLs. So a part of this rebate is lost in higher borrowing costs.

But there will still be a big loss for Thai consumers owning cars in this segment, and the total loss will exceed the 30bln that the government are willing to put into the tax rebate, but one have to consider, that it is only a loss if you are selling while the tax rebate is being offered.

[MoonRiverOasis]

But there will still be a big loss for Thai consumers owning cars in this segment, and the total loss will exceed the 30bln that the government are willing to put into the tax rebate, but one have to consider, that it is only a loss if you are selling while the tax rebate is being offered.

I don't see used prices tumbing, even in the short term. The fact is that all the scheme has done is make it even harder to qualify for new car finance, making them more inaccessible than ever. However, as a side effect, it's generating huge interest in cars, so the end result is more people in the (more accessible) used car market, which could even lead to an increase in used car values due to imcreased demand..

[jamora]

But there will still be a big loss for Thai consumers owning cars in this segment, and the total loss will exceed the 30bln that the government are willing to put into the tax rebate, but one have to consider, that it is only a loss if you are selling while the tax rebate is being offered.

I don't see used prices tumbing, even in the short term. The fact is that all the scheme has done is make it even harder to qualify for new car finance, making them more inaccessible than ever. However, as a side effect, it's generating huge interest in cars, so the end result is more people in the (more accessible) used car market, which could even lead to an increase in used car values due to imcreased demand..

The average buyers qualification requirements for the average car is no different than before. It is only difficult for those who can only afford a new car if they get the tax rebate. Those who had no problems qualifying before the rebate, have no problems now either, but they get a good discount. And people are worried about the drop in value, which can be seen in the high increase in 2nd hand A and B-segment cars for sale in Sep.

[MoonRiverOasis]

The average buyers qualification requirements for the average car is no different than before.

Many lenders have already come out and publicly stated that finance requirements have been tightened up as a result of the new car buyers rebate - I'm pretty sure there was even an English language interview/article about it on the BKK Post website if you want to have a search

The single biggest flaw of the campaign is that finance companies are not legally able to become the benefactor of the tax rebate - if that was allowed, it'd all be very simple and straight-forward, and it would actually make first car onwership easier and more affordable.

As an example, let's look at a VIOS 'E' - it retails at ~600K. So a first car buyer ponies up 25% down payment (150K), leaving 450K financed. After one year, the buyer gets their 100K rebate in cash.. All good. But now the buyer defaults, and the finance company reposses it - leaving them with two options: 1) Repay the 100K tax rebate so the car is resellable now, or 2) wait another 4 years (and lose another ~12-15% on depreciation, not to mention lost interest) before selling it to recoup their losses. Either way they lose about 100K+ Baht on a 450K Baht deal...

[jamora]

The average buyers qualification requirements for the average car is no different than before.

Many lenders have already come out and publicly stated that finance requirements have been tightened up as a result of the new car buyers rebate - I'm pretty sure there was even an English language interview/article about it on the BKK Post website if you want to have a search

The single biggest flaw of the campaign is that finance companies are not legally able to become the benefactor of the tax rebate - if that was allowed, it'd all be very simple and straight-forward, and it would actually make first car onwership easier and more affordable.

As an example, let's look at a VIOS 'E' - it retails at ~600K. So a first car buyer ponies up 25% down payment (150K), leaving 450K financed. After one year, the buyer gets their 100K rebate in cash.. All good. But now the buyer defaults, and the finance company reposses it - leaving them with two options: 1) Repay the 100K tax rebate so the car is resellable now, or 2) wait another 4 years (and lose another ~12-15% on depreciation, not to mention lost interest) before selling it to recoup their losses. Either way they lose about 100K+ Baht on a 450K Baht deal...

Yes, it is tightening up, but mainly to target the first buyers who can only afford the new car because of the rebate. We just bought a Jazz (without the rebate), and the finance requirement were the same as last april when we bought our Accord. My wife is a AVP a K-bank (with the credit card business though), and according to her info, they are trying to set up the system, so buyers who could buy before, will still be able to get the same credit deals, but those who are low income and aiming for the tax rebate, will have to put down a higher downpayment and face a higher interest rate.

They have also looked into the option of financing the car in a more consumer-finance way, where the buyer will immediately have ownership of the car, and if he default, the buyer will have to pay back the 100,000 THB tax rebate.

What the final result is, I don't know.

But I'm still sure it will affect the 2nd hand market. Many of those who qualify for the 100,000 THB rebate are still normal buyers with a good credit rating. If they are willing to put down a higher down payment, they can easily get a good financing package (which is the same for the 2nd hand market). So basically they are get a new car for the price of a one year old, and then how will the one year old car be able to sell at the same price of a new one?

[kartman]

I think if the government had done a survey first of the target group they wanted to help ie motorcyclists with a very simple two part questionair , 1/ would you buy this car for xx baht / would you buy this car for 60,000 baht less 2/ would you buy this truck for xx baht / would you buy this truck for 100,000 baht less, which i think in the vast majority of cases the answer would be the same they could have saved themselves time and the country money as it is nobody actually knows how to work it out and in the end will help the wrong group of people. Instead they shot from the hip .

[kartman]

Very late edit, change all the woulds to can

[MoonRiverOasis]

Yes, it is tightening up, but mainly to target the first buyers who can only afford the new car because of the rebate.

See, we agree

[bangbonboy]

so a foriegner paying over 4000 baht income tax a month for the last 3 years with a work permit is not credible for this offer of 100 000 baht tax rebate?

[MoonRiverOasis]

so a foriegner paying over 4000 baht income tax a month for the last 3 years with a work permit is not credible for this offer of 100 000 baht tax rebate?

Only credibiltiy required for this scheme is a Thai ID card and Tabien Ban...

[LeCharivari]

But there will still be a big loss for Thai consumers owning cars in this segment, and the total loss will exceed the 30bln that the government are willing to put into the tax rebate, but one have to consider, that it is only a loss if you are selling while the tax rebate is being offered.

I don't see used prices tumbing, even in the short term. ....

Ditto. The "big loss" idea is based on new rebated cars costing little more than second-hand cars, but it ignores the simple fact that the vast majority of car buyers are NOT first-time car buyers and are NOT eligible for any rebate. Even if you consider that Thai car buyers only buy 10 cars in their lifetimes that still means that 90% of car buyers will not be eligible for the rebate; if they buy 20 cars in a lifetime, then 95% will be ineligible, etc.

[MoonRiverOasis]

Ford are saying that 20% of last months bookings for the Fiesta cancelled as a result of the 1.6L not qualifying for the rebate.

It will be interesting to see how they fare this month - if the drop in sales keeps up, we might start seeing some limited edition 1.4L 4AT Trends and Sports

[Spoonman]

so a foriegner paying over 4000 baht income tax a month for the last 3 years with a work permit is not credible for this offer of 100 000 baht tax rebate?

Only credibiltiy required for this scheme is a Thai ID card and Tabien Ban...

The HR dept at my place of employment said we farangs were eligible for the rebate.

[jamora]

But there will still be a big loss for Thai consumers owning cars in this segment, and the total loss will exceed the 30bln that the government are willing to put into the tax rebate, but one have to consider, that it is only a loss if you are selling while the tax rebate is being offered.

I don't see used prices tumbing, even in the short term. ....

Ditto. The "big loss" idea is based on new rebated cars costing little more than second-hand cars, but it ignores the simple fact that the vast majority of car buyers are NOT first-time car buyers and are NOT eligible for any rebate. Even if you consider that Thai car buyers only buy 10 cars in their lifetimes that still means that 90% of car buyers will not be eligible for the rebate; if they buy 20 cars in a lifetime, then 95% will be ineligible, etc.

We did the simulation with A and B segment cars only, but included those that are not entitled to the tax, since they also will be affected. From government statistics, you can see that this segment of cars, are much more popular for first time buyers than the more expensive once. And most of the first time buyers are also those who would be more interested in the 2nd hand market, since many first time buys in Thailand are 2nd hand cars. And one final thing to remember is, that more or less everybody are eligible for this new tax. We talked to some banks and people from the registration office, and most people just put it in a family members name.

When we bought our Jazz, the dealer asked if we wanted to apply for the tax rebate, but when we said we were not first time buyers, they asked if we know someone who would be.

I know the loss figures are theoretical, but know matter how one put it, there will be some loss for owners of segment A and B cars, for as long as the rebate is available.

[MoonRiverOasis]

so a foriegner paying over 4000 baht income tax a month for the last 3 years with a work permit is not credible for this offer of 100 000 baht tax rebate?

Only credibiltiy required for this scheme is a Thai ID card and Tabien Ban...

The HR dept at my place of employment said we farangs were eligible for the rebate.

The requirements to claim the refund are listed in section 3 of this doc: http://www.excise.go.th/fileadmin/STA/excel_file/car/manual_car.pdf

No mention of Passport Numbers, Work Permits, or Embassy/Immigration address letters...

There is a note on the excise tax department website stating that the claim form, transfer of ownership waiver, and eligibility notification forms are now "under review" though: http://www.excise.go.th/index.php?id=1015

So it appears there's no solid answers at this stage..

[LeCharivari]

And one final thing to remember is, that more or less everybody are eligible for this new tax. We talked to some banks and people from the registration office, and most people just put it in a family members name.

When we bought our Jazz, the dealer asked if we wanted to apply for the tax rebate, but when we said we were not first time buyers, they asked if we know someone who would be.

"more or less everybody"? Presumably you mean "everybody" that doesn't already own a car and is over 21?

Putting a car in someone else's name may be a solution for some, but you have to trust them not only to hand the car over to you, but the tax refund as well (as it will be sent to them after a year). Once they realise that this means that they won't be eligible for any refund themselves some "family members" may have second thoughts on giving away their refund for nothing. The dealers may be pushing it as a sales pitch, but unless second-hand values have actually come down (which so far there is no sign of that I am aware of, even though the tax cut has already been introduced) it looks like a publicity stunt to get some votes supported by scare-mongering by the new car dealers to boost their sales.

[jamora]

And one final thing to remember is, that more or less everybody are eligible for this new tax. We talked to some banks and people from the registration office, and most people just put it in a family members name.

When we bought our Jazz, the dealer asked if we wanted to apply for the tax rebate, but when we said we were not first time buyers, they asked if we know someone who would be.

"more or less everybody"? Presumably you mean "everybody" that doesn't already own a car and is over 21?

Putting a car in someone else's name may be a solution for some, but you have to trust them not only to hand the car over to you, but the tax refund as well (as it will be sent to them after a year). Once they realise that this means that they won't be eligible for any refund themselves some "family members" may have second thoughts on giving away their refund for nothing. The dealers may be pushing it as a sales pitch, but unless second-hand values have actually come down (which so far there is no sign of that I am aware of, even though the tax cut has already been introduced) it looks like a publicity stunt to get some votes supported by scare-mongering by the new car dealers to boost their sales.

A lot of people wouldn't mind putting it in their moms or sisters name, but I guess some would have trust problems.

I wouldn't expect the price to drop now, the tax rebate is only a few days old. And since prices in general are rigid, they won't start to respond till the market is getting over saturated, and that is already happening. If you have followed the 2nd hand market closely over the last few months, you'll see a big increase in "for sale" ads, and the main increase is in the a and b segment.

[katabeachbum]

And one final thing to remember is, that more or less everybody are eligible for this new tax. We talked to some banks and people from the registration office, and most people just put it in a family members name.

When we bought our Jazz, the dealer asked if we wanted to apply for the tax rebate, but when we said we were not first time buyers, they asked if we know someone who would be.

"more or less everybody"? Presumably you mean "everybody" that doesn't already own a car and is over 21?

Putting a car in someone else's name may be a solution for some, but you have to trust them not only to hand the car over to you, but the tax refund as well (as it will be sent to them after a year). Once they realise that this means that they won't be eligible for any refund themselves some "family members" may have second thoughts on giving away their refund for nothing. The dealers may be pushing it as a sales pitch, but unless second-hand values have actually come down (which so far there is no sign of that I am aware of, even though the tax cut has already been introduced) it looks like a publicity stunt to get some votes supported by scare-mongering by the new car dealers to boost their sales.

A lot of people wouldn't mind putting it in their moms or sisters name, but I guess some would have trust problems.

I wouldn't expect the price to drop now, the tax rebate is only a few days old. And since prices in general are rigid, they won't start to respond till the market is getting over saturated, and that is already happening. If you have followed the 2nd hand market closely over the last few months, you'll see a big increase in "for sale" ads, and the main increase is in the a and b segment.

seconhand Vios at 490k baht at 6% ineterst or brand new with new car subsidised finance at 590k minus 100k in a year? wont take long befor the secondhand need to be at 449 to attract any interest.

has it been announced yet how the tax refund will be paid out? check or transfer? both rather easy to set up before taking delivery

only one issue, expired ID card before 5 years

[MoonRiverOasis]

seconhand Vios at 490k baht at 6% ineterst or brand new with new car subsidised finance at 590k minus 100k in a year? wont take long befor the secondhand need to be at 449 to attract any interest.

First off, let's us some proper numbers. A VIOS E 4AT is 609K, and a 3yo one is worth 430-450K. (2yo would be 450-470K, but these are much rarer used buys)

The used VIOS E buyer needs to come up with max. 10% deposit, so 43-45K Baht in order to get finance, the new (remembering they're first car buyers) needs to come up with 152K downpayment (25%), and more than likely a guarantor too now.

Then of course there's the used dealers that will mash the numbers so you only have to pay 20K down...

Forget interest rates - 6% still sounds awfully cheap to the unitiated, and the emotion/excitement of owning your very first car usually outwieghs all forms of common or financial sense anyway.

And by definition, a first car buyer is either very young, or not very financial. So in asking them to pay 150K down vs. 45K (or 20K in reality) you're asking them to come up with several additional months of salary...

And that's why the used market thrives here - it's all about the barrier to entry....

And this campaign does nothing to solve it. Sad thing is, it could have, had finance companies been able to become the beneficiaries of the rebate.

Edited October 5, 2011 by MoonRiverOasis

[katabeachbum]

seconhand Vios at 490k baht at 6% ineterst or brand new with new car subsidised finance at 590k minus 100k in a year? wont take long befor the secondhand need to be at 449 to attract any interest.

First off, let's us some proper numbers. A VIOS E 4AT is 609K, and a 3yo one is worth 430-450K. (2yo would be 450-470K, but these are much rarer used buys)

The used VIOS E buyer needs to come up with max. 10% deposit, so 43-45K Baht in order to get finance, the new (remembering they're first car buyers) needs to come up with 152K downpayment (25%), and more than likely a guarantor too now.

Then of course there's the used dealers that will mash the numbers so you only have to pay 20K down...

Forget interest rates - 6% still sounds awfully cheap to the unitiated, and the emotion/excitement of owning your very first car usually outwieghs all forms of common or financial sense anyway.

And by definition, a first car buyer is either very young, or not very financial. So in asking them to pay 150K down vs. 45K (or 20K in reality) you're asking them to come up with several additional months of salary...

And that's why the used market thrives here - it's all about the barrier to entry....

And this campaign does nothing to solve it. Sad thing is, it could have, had finance companies been able to become the beneficiaries of the rebate.

last sentence is very true

if the financecompanies could recive the cash back, a one year ballon of 97% of excice refund amount could have been designed

reduced risk for finance, reduced interestcost for buyer

[MoonRiverOasis]

last sentence is very true

if the financecompanies could recive the cash back, a one year ballon of 97% of excice refund amount could have been designed

reduced risk for finance, reduced interestcost for buyer

Yep. And seeing as the buyer must sign the no-transfer waiver, and the intention to request a rebate form at the time of purchase (you can't decide to take advantage of the rebate post-sale), they could have also used the <= 100,000 rebate to reduce the downpayment required, which would have really opened the scheme up to genuinely hard-struck first car buyers...

The way it is now, it only assists those that could have afforded it anyway.

[katabeachbum]

last sentence is very true

if the financecompanies could recive the cash back, a one year ballon of 97% of excice refund amount could have been designed

reduced risk for finance, reduced interestcost for buyer

Yep. And seeing as the buyer must sign the no-transfer waiver, and the intention to request a rebate form at the time of purchase (you can't decide to take advantage of the rebate post-sale), they could have also used the <= 100,000 rebate to reduce the downpayment required, which would have really opened the scheme up to genuinely hard-struck first car buyers...

The way it is now, it only assists those that could have afforded it anyway.

politicians

promises maid during election time to get low income voters

in reality helping families with good finances, to become voters.

brilliant

and using government funds

and increasing sales for a few chosen automakers

[MoonRiverOasis]

Just as an update to this, according to actual used car sales data, sub-B segment 1500cc cars (Vios, Yaris, City, Jazz etc), and 4-door pickups have lost ~18K-20K Baht used value since the first car buyer campaign started.

There's no data to suggest that they'll have any further significant price drops outside of normal depreciation though.

[LeCharivari]

Just as an update to this, according to actual used car sales data, sub-B segment 1500cc cars (Vios, Yaris, City, Jazz etc), and 4-door pickups have lost ~18K-20K Baht used value since the first car buyer campaign started.

There's no data to suggest that they'll have any further significant price drops outside of normal depreciation though.

That seems to be what should logically have been expected given the details of the policy. Given that the actual drop in second-hand values has been no more than 3 or 4% despite the publicity over the scheme, when the effect should have been felt most, it looks like a panic over nothing.

"since prices in general are rigid, they won't start to respond till the market is getting over saturated, and that is already happening. If you have followed the 2nd hand market closely over the last few months, you'll see a big increase in "for sale" ads, and the main increase is in the a and b segment."

Well, that indicates that the drop in used car values MRO has referred to may have nothing to do with the excise rebate at all, but may be due to more used cars on the market - quite likely as so many have been encouraged to buy on HP only to discover they can't keep up the payments - after all, its pretty unlikely that its caused by current owners selling their cars so they can replace them with new cars, bought with a rebate, in someone else's name. If the second-hand market is getting saturated then its an indicator the Thai economy isn't as strong as its believed to be, that car sales overall (new and secondhand) are likely to drop, and that finance companies are likely to be even more careful about who they give finance to.

[MoonRiverOasis]

Just as an update to this, according to actual used car sales data, sub-B segment 1500cc cars (Vios, Yaris, City, Jazz etc), and 4-door pickups have lost ~18K-20K Baht used value since the first car buyer campaign started.

There's no data to suggest that they'll have any further significant price drops outside of normal depreciation though.

That seems to be what should logically have been expected given the details of the policy. Given that the actual drop in second-hand values has been no more than 3 or 4% despite the publicity over the scheme, when the effect should have been felt most, it looks like a panic over nothing.

"since prices in general are rigid, they won't start to respond till the market is getting over saturated, and that is already happening. If you have followed the 2nd hand market closely over the last few months, you'll see a big increase in "for sale" ads, and the main increase is in the a and b segment."

Well, that indicates that the drop in used car values MRO has referred to may have nothing to do with the excise rebate at all, but may be due to more used cars on the market - quite likely as so many have been encouraged to buy on HP only to discover they can't keep up the payments - after all, its pretty unlikely that its caused by current owners selling their cars so they can replace them with new cars, bought with a rebate, in someone else's name. If the second-hand market is getting saturated then its an indicator the Thai economy isn't as strong as its believed to be, that car sales overall (new and secondhand) are likely to drop, and that finance companies are likely to be even more careful about who they give finance to.

The drops I've noted have all occurred in the past month, so probably can be attributed to the first car buyer program.

We surveyed a number of new car salespeople over the past 2 weeks, and there were two questions they all answered unanimously: All agreed that the first car policy does not make owning a new car more accessible (i.e. it only helps those that could have afforded it anyway), and all agreed that finance approvals are now harder to get.

[LeCharivari]

..... All agreed that the first car policy does not make owning a new car more accessible (i.e. it only helps those that could have afforded it anyway), and all agreed that finance approvals are now harder to get.

Hardly the effect that was intended .... but if you're working at the Ford/Mazda factory, like my cousin-in-law's husband (?), its a gift: he can now get the new Ford 4 door pick up he wants at a 100,000 baht discount for staff PLUS 100,000 off as a first-time buyer, all at 0% interest!

[chris2004]

so a foriegner paying over 4000 baht income tax a month for the last 3 years with a work permit is not credible for this offer of 100 000 baht tax rebate?

Only credibiltiy required for this scheme is a Thai ID card and Tabien Ban...

Sorry what is a Tabien Ban? is it a house book as someone mentioned earlier. Does this mean a thai would only get the rebate if they owned a house? I am looking to buy a new car under this scheme in my tgf's name (yes i know the risk) but she does not own a house, only has Thai ID card. Is she still eligible?

[MoonRiverOasis]

so a foriegner paying over 4000 baht income tax a month for the last 3 years with a work permit is not credible for this offer of 100 000 baht tax rebate?

Only credibiltiy required for this scheme is a Thai ID card and Tabien Ban...

Sorry what is a Tabien Ban? is it a house book as someone mentioned earlier. Does this mean a thai would only get the rebate if they owned a house? I am looking to buy a new car under this scheme in my tgf's name (yes i know the risk) but she does not own a house, only has Thai ID card. Is she still eligible?

The Tabien Ban is the blue house registration book. Every Thai citizen must be listed in one (even kids) - there's no need to own the house - it mearly states the officially registered place of residence.

[katabeachbum]

so a foriegner paying over 4000 baht income tax a month for the last 3 years with a work permit is not credible for this offer of 100 000 baht tax rebate?

Only credibiltiy required for this scheme is a Thai ID card and Tabien Ban...

Sorry what is a Tabien Ban? is it a house book as someone mentioned earlier. Does this mean a thai would only get the rebate if they owned a house? I am looking to buy a new car under this scheme in my tgf's name (yes i know the risk) but she does not own a house, only has Thai ID card. Is she still eligible?

The Tabien Ban is the blue house registration book. Every Thai citizen must be listed in one (even kids) - there's no need to own the house - it mearly states the officially registered place of residence.

except homeless Thais (couple of million people) registered in Central residence register in BKK