Denmark's news in English

Editions:  Europe · Austria · Denmark · France · Germany · Italy · Norway · Spain · Sweden · Switzerland

Explained: Why is it so expensive to buy a car in Denmark?

Share this article

Explained: Why is it so expensive to buy a car in Denmark?
File photo: Anne Bæk / Ritzau Scanpix
15:29 CEST+02:00
The price of purchasing a car in Denmark is a lot less than what it will actually cost you to get your vehicle on the road.

Road tax, fuel, insurance, maintenance – the high costs of running a car are well known to motorists the world over and are no different, and certainly no cheaper, in Denmark.

The Nordic nation's Vehicle Registration Tax (Registreringsafgift – RA) represents an enormous outlay for motorists almost unheard of elsewhere, and must be added to the purchasing price as well as value-added tax (moms in Danish) to find the total cost of buying a new car.

Hydrogen-powered cars are exempt from RA until the end of 2021, and reductions apply to hybrid and electric vehicles. These are due to be phased out by 2022.

In 2019, the RA is 85 percent of a car's purchase price for cars worth up to 193,400 kroner. For cars worth more than this, 150 percent of the remaining value over 193,400 kroner must be added to reach the total RA.

Using an example price, this would mean that a petrol-driven car bought for 117,687 kroner would be liable for a 102,891-kroner registration fee. With value-added tax, the total cost would come to 250,000 kroner -- more than double the price on the forecourt.

Reductions for electric cars are currently in place. For the calculated RA, 20 percent is payable for cars registered in 2016, 2017, 2018 and 2019; this will increase to 40 percent in 2020, 65 percent in 2021 and 100 percent in 2023.

It is also important to be aware that deductions are further applicable to these electric vehicle fees.

Previous reductions of 10,000 kroner were increased to 40,000 kroner from the total RA in 2019, and this will be further increased to 77,500 in 2020 before being lapsing from the following year.

In practical terms, this means that the RA for electric vehicles which cost under 400,000 kroner is reduced to nearly nothing, at least until 2021.

Hybrid cars are also subject to deductions from the RA, meaning that the cost of purchasing this type of vehicle will also remain much lower than traditionally-powered cars until the end of 2021, when the RA will be almost fully phased in.

Used cars

Used vehicles are, in principle, subject to the same rules as new cars. The RA and any applicable deductions or additions are adjusted relative to the difference in value of the used car compared with an equivalent new model.

Further adjustments to the RA can be applied according to fuel consumption.

Cars over 35 years old are defined as ‘veterans' and generally have lower RA costs attached, depending on their condition and usage.

The taxing of Danish car owners dates back to 1910, when the government implemented a tax for driving on public roads. The RA as it stands today got its start in 1924, when the government put a tax on the import of 'luxury items', including vehicles. The two-tiered system has been in place since 1977, with running changes to the price cut-off point for the higher fee.

How likely is it that fees could change?

The RA was reduced from even higher rates under the last government, though that move has since been criticized for being insufficiently financed, Altinget reported last month.

The Social Democrats formed a new minority government with the support of other left-wing parties following last month's election. The party said prior to the election they did not support increasing the overall cost of buying a car, while the other parties stated they wanted the cost to motorists to remain as they are now.

But the method of calculating the RA could be reformed, moving away from the monetary value of the car and towards technical specifications such as its fuel type and emissions.

Sources: SKAT, Ministry of Tax, FDM, Altinget

READ ALSO: Here's how to buy a used car in Denmark

Get notified about breaking news on The Local

Share this article

 

The Local is not responsible for content posted by users.
Become a Member or sign-in to leave a comment.