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AUTOMOTIVE INDUSTRY - RELAXED LEGISLATION ENCOURAGES SLOVAKS TO PURCHASE USED CAR IMPORTS

Used cars freshen fleet

USED car imports from developed countries are booming in Slovakia, especially since legislation changes in 2004 made it easier to import vehicles from neighbouring countries.

USED car imports from developed countries are booming in Slovakia, especially since legislation changes in 2004 made it easier to import vehicles from neighbouring countries.

It is not surprising that used cars account for a higher percentage of Eastern Europe's overall car fleet. Purchasing power is lower than in Western Europe and many Eastern Europeans cannot afford to buy new cars.

But standards have gone up. Eastern European customers are interested in relatively new cars that still look in reasonably good shape, four- to five-year-old models imported from wealthier countries. Luckily, Western Europeans are in the habit of buying new cars and then selling them after three to four years in favour of a new one.

Until the end of 2004, the Slovak used car market in Slovakia was an exception among Eastern European countries. Slovak legislation on used car imports resulted in the artificial elevation of used car prices, so much so that used vehicles often approached the price of new cars.

In addition to import fees, the Act on Value Added Tax (VAT) made it impossible to buy a used car through leasing because of administration obstructions.

Magdaléna Drsová, a spokeswoman for AAA Auto, told The Slovak Spectator: "The local used-car market was closed, inflexible and the prices were overestimated."

AAA Auto is one of the largest used car dealers in Slovakia. Headquartered in the Czech Republic with a successful shop in Romania, the company is well positioned to compare the Eastern European markets.

Since the Slovak government removed legislative obstacles at the end of 2004 and in the first half of 2005, used car sales in Slovakia have grown significantly. There are no official sales statistics but individual companies report an increase in customer interest.

"Import fees decreased significantly. It was almost immediately reflected in an influx of cheaper, younger, safer cars of higher quality. Higher quality offers and price cuts considerably raised the demand. The situation on the market largely improved," Drsová from AAA Auto said.

ČSOB Leasing, one of the largest auto leasing companies on the market, showed a record 238 percent year-on-year increase in the number of used car sales through leasing.

Vladimír Hábr, marketing director of ČSOB Leasing, pointed out better services in the area of used cars also contributed to the growth of the market. The development of better financial services also encouraged sales.

"Leasing companies reacted to the [previous] legislation by introducing new financial products based on consumer loans and instalment selling. It was the only way to enable the sale of used cars," he explained.

Hábr added that obtaining a consumer loan from a leasing company is the most advantageous way to finance a used car, even now that VAT legislation has changed. When you buy a car through classical leasing, the leasing company is the actual owner of the car until the lease is paid off. When buying through a consumer loan, the buyer is immediately the owner.

"This product solves the concern of customers about the ownership of a car as well as concerns about financial settlement in case of a car accident or theft," Hábr added.

AAA Auto as well as ČSOB Leasing do not agree with some new car dealers that used car sales in Slovakia will lower the quality of the car fleet in Slovakia. They are confident that a used car boom will actually renew the fleet.

The average age of vehicles in Slovakia is 14 years. People who would not be able to afford a new car usually own old cars. For them, a used car is very often the only option.

"Cars made in 1998 and 1999 are the strongest group of imported cars. It means that the average age of cars in Slovakia is decreasing thanks to used car imports," Hábr from ČSOB Leasing said.

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