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When Governments Run Dealerships

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On: Sat, Jan 11, 2014 at 9:51AM | By: Karen Cook

When Governments Run Dealerships

Here in the States most of us take the ability to buy and drive a vehicle for granted. Having transportation is essential and even if you drive an old clunker you have to have a way to get around. We complain that we don’t have enough money to buy the car of our dreams and we settle for something dependable, but most of us have a car of some kind. Take a look in your driveway and be thankful for whatever is there. You could live in Cuba.

The Cuban government eliminated a law this month which had required residents to apply for a Transportation Ministry permit before they could buy either a new or used car. These permits took months or years before they were issued. The public was overjoyed and lined up for the opportunity to buy vehicles permit-free. Their joy was short-lived, however.

You see, most of the dealerships in Cuban are run by the government and they decide a car’s value. I don’t suppose the salesmen have a copy of Kelly Blue Book in their desks. Potential buyers were astounded at the prices they found. A new Kia Rio hatchback which sells for $13,600 in the US was marked $42,000! A new Peugeot 508 family sedan cost $262,000 while US consumers would pay only $53,000.

Ok, so a new car was off the table. In the past the government sold used rental cars for around $5,000-$8,000. But, no, the used lot had nothing affordable either. A 2009 Hyundai minivan had a sticker price of $110,000 while the cheapest vehicle sold on the first day without the permit law was a 1997 BMW which went for $14,457.

According to Philip Peters of the Cuba Research Center in Virginia it is senseless for the government mark up vehicles “so much that they’re not going to make any money”. The government also legalized the sale of used vehicles between private individuals without a permit back in 2011. Since the average monthly income of a Cuban family is around $20 this seems to be the only way they will be able to afford their own car.


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