Why are cars so expensive in Ireland?

The expense of cars in Ireland is well-known, influenced by various factors. Foremost among these is the substantial taxation imposed on vehicles, notably a 23% Value Added Tax (VAT) on new cars, making them notably pricier compared to many other nations. Additionally, the Vehicle Registration Tax (VRT), calculated based on the Open Market Selling Price, further elevates the purchasing costs in Ireland. These taxes significantly inflate the overall expenses associated with car ownership in the country.

Furthermore, Ireland's relatively limited car market contributes to reduced competition among dealerships, resulting in higher prices for consumers. Import duties on vehicles from abroad also contribute to the overall cost. The high standard of living in Ireland amplifies the expense of owning a car, with elevated insurance premiums, maintenance expenditures, and fuel prices further adding to the financial burden. Collectively, these factors underscore the considerable costs associated with car ownership in Ireland.

The Impact of Import Duties and Taxes

The imposition of import duties and taxes on vehicles significantly drives up the cost of cars in Ireland. Taxes such as VAT, VRT, and others collectively contribute to a substantial increase in prices, particularly for new cars. These taxes serve as significant barriers to affordable and accessible transportation for numerous individuals and families across Ireland, posing challenges to car ownership and mobility for many.

How do import duties and taxes affect the price of cars?

1. Customs Duty:

• Applies to cars imported from outside the European Union (EU), including the United Kingdom (UK) since 2021.
• Rate depends on the car's country of origin:
• 0%: Manufactured in the UK.expand_more
• 10%: Manufactured elsewhere.

2. Value Added Tax (VAT):

• A 23% tax applied to the total value of the car, including the purchase price, transportation costs, insurance, and any customs duty paid.expand_more
• Applies to both new and used cars imported from any country, including EU member states, if the car is:
• Less than six months old or has driven less than 6,000 kilometres.expand_more

3. Vehicle Registration Tax (VRT):

• The most significant factor affecting car prices in Ireland.exclamation
• Calculated as a percentage of the car's Open Market Selling Price (OMSP), which includes all taxes and duties.expand_more
• The OMSP is determined by Revenue, the Irish tax authority, based on the car's:
• Model
• Age
• Engine size
• CO2 emissions

Impact on Car Prices:

Due to these taxes and duties, the final price of a car in Ireland can be much higher than its price in the country it was imported from. For instance, a car with a pre-tax price of €20,000 could incur:

• €2,000 in customs duty (if applicable).exclamation
• €4,600 in VAT.exclamation
• €3,600 in VRT (assuming a base rate of 18%).exclamation

This would bring the total price to €30,200, a 51% increase from the pre-tax price.