Serbians queue up at the bank to fulfil the dream of buying a new car

By Boris Babic Jul 18, 2007, 3:56 GMT

Belgrade - Financial incentives are prompting many Serbs to buy a new car or at least a better set of wheels than one of the decrepit old bangers most of them have been forced to drive for years.

Unfortunately only a few citizens have enough money on hand to buy a vehicle outright for cash and securing a finance deal for a dream mobile is not easy either. Most buyers have to pay in banknotes - a tall order in a country where the average salary is around 350 euros (477 dollars), of which 50 per cent goes on food and housing.

Some would-be buyers have money stashed away, others beg and borrow from their parents or friends. In most cases though cash- strapped buyers are forced to head for a bank in order to seek financing in one form or another. The banks are happy to oblige and have designed a variety of services. Loan repayments are usually over several years to keep the costs down.

After talking to the bank manager, the next dilemma facing most car buyers in Serbia is whether to go for a new or used car. 'The best car is a new car,' automotive pioneer Henry Ford once declared, but Serbs who buy used vehicles may find themselves able to afford a more upmarket marque, a car with bigger engine power or one with more space inside.

Now that banks have started providing consumer credits following the 15-year credit drought during the Milosevic era, Serbs have been spending increasingly more money on importing new and used cars and business is flourishing.

In 2006, 47,000 new cars were sold, of which 12,600 were locally- made Zastavas. The remainder were foreign makes. Serbs imported a total of 69,450 new and used cars for a record total of 409 million euros.

Those looking for a used car are keen to import one from abroad, especially one which has never been subjected to the rigours of potholed Serbian roads. Finding out about the provenance of a used car is not easy though as most are available through intermediaries only.

The formula on the hundreds of used car lots in Serbia is simple: To the cost of the car must be added 20 per cent import duty for foreign cars, 18 per cent VAT and the importer's commission. At the end of the day, a 5,000-euro price tag can easily swell to 8,000 euros.

The prices of new cars start at roughly 5,000 euros - that is the price ticket on the cheapest of the Zastava range. The 101 has been in production since 1971. Another home-grown model, the Koral, which used to be known as the Yugo, has been on the market since 1980.

Apart from being hopelessly outdated in all respects, the Zastava models have a reputation for unreliability. An increasing number of Serbs are therefore prepared to tighten their belts and save up for longer in order to get something faster, safer and more roomy.

The top-model, the Giugiaro-designed Zastava Florida, was introduced in 1986 and outwardly unchanged, it still costs 7,000 euros. This puts it in the same price bracket with the cheapest of imported cars. This is a sector where Romanian carmaker Dacia, a subsidiary of French car giant Renault, has dominated with its Logan.

Not exactly pretty but sturdy and large, with generous boot space and five different engines to choose from, the Logan has proved a big hit in Serbia in the past two years. Exactly 4,805 examples were sold in 2006 - more than any other car excluding the cheap Yugo (5,198).

Depending on the package and engine specified, prices for the Romanian workhorse, which was designed specifically to cater for the needs of Eastern European motorists, start at 7,150 euros.

A 1.6 litre, 90-horsepower Logan with air-conditioning and a generous electronics package is still well below the critical 10,000- euro mark and within reach of families capable of scraping together a down payment of 3,600 euros. To pay off the cost of the car 48 monthly instalments of 160 euros are needed.

Other marques selling well in Serbia are mostly bottom-end models with low five-figure price tags made by Skoda, Volkswagen and Opel along with French Peugeot and Renault models, US carmaker Chevrolet, South Korea's Hyundai and the trusty Russian Lada, all of which notched up sales of more than 1,000 cars.

Many people in Serbia would however rather spend that sum on a used car brought from Western Europe. Imported cars must meet Euro 3 emission standards though, so only models made from 2001 are eligible. Such buyers are usually on the lookout for a specific model, with VW and Audis being particularly coveted.

The growth in the availability of financing has certainly changed the picture on Serbian roads. More than 150,000 potentially dangerous 'old bangers' held together by a wing and a prayer have been replaced by more modern or brand new vehicles.

Despite the gradual renewal, the roads in Serbia are still full of the type of rusty, smoke-billowing old crocks which have typified the motoring scene here for decades. Most of these display numerous other defects too such as faulty lights and bald tyres. According to observers it is likely to be a good many years before these vanish from the scene for good.