Why are Imported Cars so Pricey?

Imported goods are bound to attract greater attention than domestic goods. The ultimate game changer, though, is always an imported vehicle. 

A Ferrari belonging to a star. Or the flashy imported vehicles that ply the streets of EDSA.

Only a few people, though, can afford such pleasures. Imported automobiles are extremely expensive, and as a result, they are uncommon. 

We investigated why imported automobiles and motorcycles are so expensive, and here is what we discovered.

Transport

Airplanes or ships are used to transport cars from one country to another. Both ways are exorbitantly priced. 

You’d also like the delivery to proceed smoothly and the cargo to arrive in first-class condition. This can be secured with the assistance of car insurance, which will come at a fee.

Taxes

The tax structure in the country accounts for about 20-40% of the price of automobiles in this country. Because practically all automobiles here are imported from other countries (fully built-up units, or CBUs), you’ll have to pay additional importation duty taxes and a 12% value-added tax on top of the vehicle’s original price.

Paperwork

Importing a car necessitates several levels of clearance. This has an impact on paperwork and payments. 

In the Philippines, you will be required to submit specific documentation, such as a Certificate of Roadworthiness and Emission Compliance, to the custom office. Cars valued less than $40,000 must go through the Department of Trade and Industry of the Philippines homologation process. Your car will be deemed a product that meets Philippines regulatory standards and specifications as a result of this process. 

All of these procedures are costly.

Customs

Get ready to have your mind blown! Importing a new car carries a 102 percent customs charge. It is 160 percent of the ex-showroom price on old/second-hand autos. These expenses bring the total cost of owning an automobile to more than 200 percent of its original cost.

Insurance

Fortunately, the automobile insurance policy will be priced based on parameters such as the current insured declared value, the make and model, engine capacity, the owner’s claim history (if relevant), and the type of coverage. There will also be a payment for importing the automobile.

So, now that you’re aware of these extra charges, consider your options before importing a vehicle. In the Philippines, you might be able to get a luxury car. The procedure will be far less time-consuming and cost-effective. And, of course, make sure it’s insured! 

That is part of the law. 

But, exactly, what is going on here?

In a nutshell, the cause of the pandemonium is a worldwide lack of computer chips, which has pushed auto manufacturers to produce considerably fewer vehicles. Automobile manufacturers ranging from General Motors to Toyota have slashed production by millions of units due to a lack of required semiconductors. 

Thousands of them are needed to make a modern automobile.

Early in the pandemic, manufacturers cut their chip purchases, but demand for automobiles rebounded far faster than predicted, leaving them scrambling for chips. The demand for connected microwaves and other smart devices ate up a large portion of the supply, while Covid-19 outbreaks and other unrelated tragedies threw the semiconductor business further off track.

Because there are fewer new automobiles on the market, manufacturers and dealers don’t need to give steep discounts to keep cars moving. They’ve discovered that when the only other alternative is not to buy a new automobile at all, buyers are willing to pay more.

As the supply of new vehicles has decreased, average transaction costs have risen dramatically. According to Edmunds, on average, individuals pay $278 more for a new automobile than the suggested retail price. It’s a significant change from before the pandemic, when it was common to pay $2,000-$3,000 less than retail.

Here, then, are the various import duties imposed on cars sourced from other countries:

• Japan – 0% for cars with more than 3.0L of engine displacement; 20% for cars with less than 3.0L of engine displacement
• South Korea – 5%
• China – 5% for cars with less than 1.5L of engine displacement; 5% for cars with more than 3.0L of engine displacement; 30% for cars with 1.5L to 3.0L of engine displacement
• Thailand – 0%
• Malaysia – 0%
• Indonesia – 0%
• India – 30%
• USA – 30%
• Canada – 30%
• Germany – 30%
• UK – 30%
• France – 30%
• Italy – 30%
• Spain – 30%
• Sweden – 30%

Bottom line

Custom Rules:

Is there a depreciation in the value of imported vehicles?

Yes, if the imported car is an older model or one from a year prior to the current year. The depreciation schedule is ten percent each year, counting down from the current year’s zero percent depreciation rate (0 percent ). 

Motor vehicles with a piston displacement of 2000 cc and above may receive a maximum depreciation of 50%, while those with a piston displacement of less than 2000 cc may receive a maximum depreciation of 70%