How Much to Earn for a Decent Car with the New Auto Excise Tax in the Philippines?

Read on for what you need to know about the new auto tax reform in the Philippines, and how much you need to earn on average if you’re thinking about owning a decent car starting 2018.

If you’ve been following the news, you must have had a whiff of what’s coming for the auto industry in the coming months. The Department of Finance (DoF), in its intention to pursue a more progressive tax measure, which also aims to curb Manila’s worsening traffic condition, has proposed a new auto excise tax.

To put it simply, the proposed tax reform was designed in such that it will reduce car ownership because of the significant add-on costs for buyers in taxes, and indirectly encourage the use of public transportation. Further, not only does the higher tax cover automobiles, but also petroleum products. It only means that anything related to car ownership in the Philippines will be getting more expensive soon, as the implementation will be staggered on a two-year period: 2018 to 2019.

So, if you’re thinking about buying yourself a new car, you probably need to rethink your ways and means to earn adequate money to prepare for the bills. Find out what you’re getting into as we’ve compiled the numbers that matter for different types of cars, as they’re categorized into segments falling under the new auto excise structure.

The numbers

Under the new auto excise tax structure, vehicles priced up to Php 600,000 will be taxed 5% (increased from 2%). For vehicles priced Php 600,000 to 1 million, 20%; for those 1.1 to 2.1 million in value, 40%, and for vehicles priced 2.1 million and about, 60% auto excise tax is assigned.

But since its announcement, both private and public sector proponents have been protesting this new tax structure. Several social media releases have even detailed the substantially higher standard retail prices (SRPs of known car models. The DoF thus amended their proposal on January 2017, incorporated into HB 4774 also known as the Tax Reform for Acceleration and Inclusion Bill Act. It was then that the DoF amended its proposal on January 17, 2017, which was then incorporated into the HB 4774, also known as the Tax Reform for Acceleration and Inclusion Bill Act.

Here’s an outline of the tax structure. Credit to Security Bank of the Philippines for the figures below.

Net Manufacturer’s / Importer’s Selling Price Current Excise Tax Structure HB 4774 Auto Excise Tax Proposal 

Up to 600,000 

2% 

4% 

Over 600,000 to 1.1 Million 

12,000 20% in excess of 600,000 

24,000 40% in excess of 600,000 

Over 1.1 Million to 2.1 Million 

112,000 40% in excess of 1.1 Million 

224,000 100% in excess of 1.1 Million 

Over 2.1 Million 

512,000 60% in excess of 2.1 Million 

1,224,000 200% in excess of 2.1 Million 

What it means for potential car buyers

Larger vehicles and high-end cars selling at 1.1 million to 2.1 million will be taxed at a fixed excise of 224,000 (increased from 112,000) plus 100% (from 40%) of the amount in excess of 1.1 million, while those selling at over 2.1 million will be taxed a fixed excise of 1,224,000 (increased from 512,000) plus 200% of the amount in excess of 2.1 million.

The best thing to do for interested car buyers is to just do the purchase now rather than later. But if it can’t be avoided to carry out the purchase by next year, then here’s what you’re in for. Check out the SRPs of some popular car models, as outlined by Security Bank:

Car Price Before Tax SRP (Current Excise Tax) SRP (DOF Excise Tax Proposal ) Increase in SRP 

Toyota Wigo 

463,725 

473,000 

486,912 

13,912 

Mitusbishi Mirage G4 

561,765 

573,000 

589,853 

16,853 

Toyota Vios 

587,255 

599,000 

616,618 

17,618 

Ford Ecosport 

735,833 

775,000 

883,000 

108,000 

Honda Mobilio 

770,833 

817,000 

925,000 

108,000 

Ford Ranger 

830,833 

889,000 

997,000 

108,000 

Nissan Juke 

906,677 

980,000 

1,088,000 

108,000 

Mazda 3 

921,667 

998,000 

1,106,000 

108,000 

Honda Civic 

996,667 

1,088,000 

1,196,000 

108,000 

Toyota Innova 

1,107,143 

1,222,000 

1,550,000 

328,000 

Chevrolet Trailblazer 

1,219,206 

1,378,888 

1,706,888 

328,000 

Toyota Fortuner 

1,228,571 

1,392,000 

1,720,000 

328,000 

Ford Everest 

1,476,429 

1,739,000 

2,067,000 

328,000 

Theoretical Car 

6,717,500 

10,000,000 

10,748,000 

748,000 

Note from Security Bank: Please be advised that the figures presented in this table may not be exact and is for educational purposes only.

The low-down: how much do you need to make now?

If you’re doing some quick math now in your head, at the very least, you should be earning about Php 50,000 to afford a mid-range priced car and still be able to afford basic necessities. For example, the net SRP of a Honda Mobilio with the new auto excise tax is Php 950,000. This means a monthly expense of about Php 35,000 if you want to pay it off in two years, for example, under an auto loan scheme.

There is some good news though: the proposed auto excise tax reform will not affect used or second-hand cars. Availing some current models of second-hand cars is still covered by some auto-financing institutions and banks, so you can still get a pretty good deal of paying only about say, Php 10,000 to Php 15,000 monthly for a decent second-hand car that’s in the 2010 model and onwards.

So, opt to amortize your car payments through a financing institution that offers friendly payment terms. This way you dodge the sky-high car prices come the auto excise tax reform implementation, and make good, practical use of your money.

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