Is the burden on the middle-class who want to purchase a new car high?

It is expected that the years-long import restriction on cars would be eliminated and very soon the streets on the most frequented roads of Colombo will be filled with brand-new cars. But Sri Lankans are already bombarded with the news of the high taxes, which will continue at the same high rates when there was a previous ban. This has made consumers worry about the amount of hard-earned money they have to shell just to get a vehicle to go from point A to point B which is often not a luxury like it is in another country. 

After all, in September 2024, voters voted in the NPP because there were promises made that the government would work on its election theme ‘thriving nation, a happy life’.  However, making the choice to afford a good car seems out of reach for many.

The Dailymirror spoke to, Pramith, 34. He is a classic example of someone who has his own transport to get his day-to-day work done. He is employed in the tourism industry as a chauffeur. He recently purchased a car to improve the service he provides to his customers, mainly tourists. He transports clients from the airport to relevant hotels. 

He said, “Due to the already high prices of cars, I cannot provide better services to tourists. A better service would include electric seats, an upgrade to higher-capacity vehicles like minivans like the Toyota Voxy and Toyota Alphard and vehicle space which ensures a comfortable smooth ride.

These facilities would give tourists peace of mind when travelling long distances from the airport to their hotels”. 

Sri Lanka has one of the highest tax regimes in the world. For a youngster to get a car in Sri Lanka is a challenge. It is a challenge to get a new car immediately, unless you have wealthy parents or relations to fund you”

- Charaka Perera, Past President of Ceylon Motor Trader’s Association

He also mentioned that as a result of the high taxes and insurance costs in the tourism industry- where insurance runs around Rs 500,000 per person- the insurance amounts to Rs 2 lakhs a year.

When asked if the taxes by the government came down, he said that money would be freed for upgrades and other important expenses related to providing a better service, enabling him to earn more. “Life would be easy; right now it is difficult,” he said, highlighting such high expenses are not just a one-time burden, but it carries on months after making that crucial purchase.

This newspaper also had the opportunity to speak to Charaka Perera, Past President of Ceylon Motor Trader’s Association (2021-2023) to get his comments. He said, “Sri Lanka has one of the highest tax regimes in the world. For a youngster to get a car in Sri Lanka is a challenge. It is a challenge to get a new car immediately, unless you have wealthy parents or relations to fund you.”

He added, “If you have the financial backing for this, it is not a problem. But on your own, it’s a bit difficult. A person who is starting his or her first job will generally go for a used vehicle in this market”.

First-time buyers 

He noted that though the selling prices of vehicles are high for first-time buyers of brand-new cars, finance plans and options are available to facilitate purchasing a car. “Approximately 70 per cent of vehicles in Sri Lanka are purchased through financing,” Perera added.  “Financial institutions can structure suitable packages based on your disposable income and down payment capacity. They can guide you towards vehicles within your budget range, whether it is valued at 8 million rupees, 10 million rupees, or 15 million rupees,” he explained. 

To tackle the issue of high prices, he proposed a managed reduction of the excise duty and the other relevant taxes. Starting with a slightly higher tax which was applicable in 2019, taxes have gradually reduced, giving an indication of what the applied rates over the next six to eight quarters would be. In this manner, consumers would benefit from decreasing car prices and the government could avoid sudden revenue shocks.

Due to the already high prices of cars, I cannot provide better services to tourists. A better service would include electric seats, an upgrade to higher-capacity vehicles like minivans like the Toyota Voxy and Toyota Alphard and vehicle space which ensures a comfortable smooth ride. These facilities would give tourists peace of mind when travelling long distances from the airport to their hotels

- Pramith (34) Owner 
chauffeur-driven vehicle

Responding to Central Bank Governor Dr. Nandalal Weerasinghe’s recent statement on second-hand car prices, Perera offered a thoughtful analysis. “We understand the Governor’s position on bringing brand-new vehicle prices slightly above used car prices,” he explained. “The concern appears to be protecting middle-class investments. Consider someone who invests 15 million rupees of hard-earned savings in a used vehicle. If unrestricted imports suddenly drop that value to 10 million, it creates significant personal losses,” he explained. 

President Anura Kumara Dissanayake mentioned recently that when brand new imported vehicles arrive in Sri Lanka, they will be priced higher in comparison to the current second-hand vehicles.

The president said that this is because of controlled measures such as limited imports. He mentioned that unregulated measures could “drain our foreign reserves”. He said that these measures are taken to protect our financial institutions.

In a few days time, Sri Lankans will embrace new imports, but what will become of the new imports will be left to be seen as there is still much speculation concerning the cost of the cars.