Excise Tax on Automobiles: What you need to know

[bigbites]

Watch it before rushing in on buying a brand new car just to beat the deadline.

[niky]

Depreciation does not follow a linear curve, and is dependent on the price of brand new vehicles.

If the current model shoots up in price, this delays the effects of depreciation on old models. It allows sellers to ask for a higher selling price than they normally should, because the gap from secondhand to brand new increases. This is why inflation also favors the seller... because it continues to raise the price of new cars, allowing the secondhand seller to hold steady on price.

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No, secondhands won't go up in price. But they'll see low to no depreciation in 2018, depending on what market segment or brand new price they're locked into. And with taxes going up AGAIN in 2019, you'll see yet another year of low to no depreciation for secondhands (again, depending on market segment).

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It doesn't matter *when* you buy that car, you will always lose money in depreciation. BUT, if you buy this year, you will delay that depreciation by quite a bit. So if you were going to buy anyway, or buy next year, and have the cash to do so, it pays to advance that purchase.

Especially considering the way exchange rates are going and possible inflationary increase by the end of the year. That DOF table is woefully inaccurate, as it doesn't take into account inflation. So those price increases may be double for some models. Best case scenario, dealers will absorb inflationary increase temporarily, but this will be merely a cosmetic cover-up... the price won't increase, but you won't get the same discounts next year you could this year.

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TLDR: Nope, not that simple.

TLDR2: Bili ka nalang ng secondhand. Benta mo 2019. Two free years of use with minimal depreciation.

[bigbites]

Wow, thanks for the insight, sir Niky!

[JCPR20]

If I may, sir: Depreciation is always based on acquisition cost; there are some ways (generally accepted principles, as they call it) to calculate depreciation e.g. straight line method, units of production method, etc. Depreciation is also not the same as market value. Market value may change as a result of a change in the price of brand new product but that change in price of brand new product will not affect the depreciation of an old product.

[Altuy]

If I may, sir: Depreciation is always based on acquisition cost; there are some ways (generally accepted principles, as they call it) to calculate depreciation e.g. straight line method, units of production method, etc. Depreciation is also not the same as market value. Market value may change as a result of a change in the price of brand new product but that change in price of brand new product will not affect the depreciation of an old product.

Sounds like Accounting

That is also my idea of depreciation, by the way; and I totally agree that it's not the same as market value.

Depreciation is constant, and it takes usable life into account. Whether a car is slightly-used or frequently-used, it depreciates with time.

In the video, I think what was highlighted is depreciation. If we look at it that way, of course, we lose "more." There's always a trade off in life: we pay (lose money), but we gain (a depreciating asset, the prestige of owning a car, etc).

And now about market value...

We could offset losses from depreciation with the help of market value. Even if someone "hypothetically" loses PhP 560,000 out of owning a PhP 1.6 Million vehicle for two years because of depreciation, the owner could still "hypothetically successfully" sell that 2-year-old vehicle for PhP 1.2 Million at the least.

And my last thought about market value: it is what gets affected when prices of brand new vehicles change or increase.

[niky]

If I may, sir: Depreciation is always based on acquisition cost; there are some ways (generally accepted principles, as they call it) to calculate depreciation e.g. straight line method, units of production method, etc. Depreciation is also not the same as market value. Market value may change as a result of a change in the price of brand new product but that change in price of brand new product will not affect the depreciation of an old product.

[True! My fault for not separating the two. I was, indeed talking about market value.

Yes, depreciation is what's on the books for accounting and tax purposes, but market value is basically what you can sell it for if you need to sell it.

In the end, getting ahead of the curve in terms of the bump in market value can save you a lot of money, if you were going to buy, anyway.

If you *weren't* going to buy, no sense in wasting up to two million bucks for a car you don't need.

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Gotta see when TGP will republish my Excise tax article online. Have a table detailing possible prices for cars under the excise scheme, after inflationary pricing has been applied.

[EQAddict]

Niky....whats your estimate of the cost of the Lexus 450d (gray market) after this excise tax thing?

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[attorney]

Niky....whats your estimate of the cost of the Lexus 450d (gray market) after this excise tax thing?

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Hmmmm..may maitim na balak! Go for it!

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[Egan101]

Niky....whats your estimate of the cost of the Lexus 450d (gray market) after this excise tax thing?

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This plus a 300-hp pocket-rocket AWD small car, it's a must to get them before the excise tax adds another 1M or more to the total cost. Hehehehe

[niky]

Niky....whats your estimate of the cost of the Lexus 450d (gray market) after this excise tax thing?

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Hahaha. Buy-sell speculation?

Given current going price on olx is at 8.2, I'd wager it's 9.5m next year (incl. inflation), then nearly 11m in 2019, depending on which way the peso goes.

Do note, however, that you won't be able to sell a 2017 as brand new next year.