All roads lead to car showroom
By Vladimir Vasiliev
The ‘trade-in’ service is already popular abroad and is soon to appear all over Belarus. A Presidential Decree is to stimulate the part exchange of old vehicles, with their value taken as part payment on a new purchase. In fact, many Belarusian car dealers have already launched the offer — called it a ‘commercial trade’. It’s yet to become widespread, however, explains Lyudmila Shabanova, Director General of the Belarusian Automobile Association. “This is because of tax peculiarities. If you give your vehicle to a car dealer for $8,000 and he repairs and resells for $10,000, 20 percent VAT is incurred on the whole price, with tax to be paid standing at $2,000; this cools interest in offering such trade-ins.” The new decree reduces tax, with VAT incurred only on the difference between the purchase price and the resale price for a second-hand vehicle. Here, VAT would total $400, rather than $2,000.
According to Ms. Shabanova, trade-ins need to be encouraged, being convenient and reliable for customers. The only disadvantage is the price at which a second-hand vehicle is bought by a car dealer for trade-in. It tends to be 15-20 percent lower than the market price, since the car dealer also needs to earn money. Of course, the advantages are obvious: there’s no need to spend time placing advertisements or finding a place at the car market, or worrying whether buyers may turn out to be swindlers.
For dealers, trade-ins are another instrument to attract clients. It’s so wonderful to arrive at a dealership in an old vehicle and leave in a new one, after extra payment.
“The service will become operational from July 1st, when customs duties on imported cars in Belarus and Russia become completely equal,” forecasts Andrey Zhukovsky, who heads the trade-in department at a large Minsk car salon. When ordering a new vehicle now, customers will have to wait 3-4 months for delivery from the manufacturer. Within three months, new, higher, customs duties are to be placed on imported second-hand vehicles. “Therefore, people are trying to take advantage of the ‘closing’ customs window, replacing their second-hand cars with slightly newer versions.”
“Sooner or later, people will return to car centres and trade-in will be in demand,” believes Mr. Zhukovsky. Some vehicles currently being bought at markets will soon be given as trade-ins to purchase new cars.