By on January 6, 2014

Last Friday, for the first time since the communist revolution there more than 50 years ago, Cubans were able to buy new and used cars without government permission, as state owned dealerships started retail sales, but residents of the island were disheartened by markups of 400% or more that the government is framing as a luxury tax. Cubans walked away from the Havana Peugeot dealer, a state-run enterprise, shaking their heads in disgust after seeing sticker prices ranging from the equivalent of $91,000 for a 2013 206 to $262,000 for a 508. For comparison, in the UK most 508s sell for less than $42,000. That’s quite a substantial additional dealer markup. Eighty percent of employed Cubans work for the state and the average wage in the country is about $20 a month so the cars area still out of reach to the vast majority of Cubans. The tens of thousands of small private businesses that have sprung up since the introduction of economic reforms have a great need for vehicles, but they too have been priced out of the market. At those prices, don’t expect Cuba’s fleet of old American iron to be taken out of service any time soon.

Roberto Gonzales, who works for the government as a driver, while walking back to his 1950s vintage Plymouth from the Peugeot dealer told Reuters, “I earn 600 Cuban pesos per month [about US $30). That means in my whole life I can’t buy one of these. I am going to die before I can buy a new car.”

The scene was similar at a state-owned used car store on the other side of Havana. More than a hundred former rental cars went on sale, priced from $25,000. Disgust was joined with anger at the prices. Cesar Perez, an artist looking at a $25,000 2005 Renault that can usually be bought outside of Cuba for about $3,000, expressed despair that his family could ever have an automobile. “These prices show a lack of respect for all Cubans. What is here are wrecks. I now have no hope of getting a car for my family.”

Guillermo Oropeza said,“at that price you can buy three cars on the street .”

A teacher, who wouldn’t give her name, looked at the prices of the used cars and sarcastically yelled out, “Are there any bicycles?” as she stomped away. Some car shoppers were afraid that the high prices were a trap so the government could accuse those with sufficient funds as guilty of economic crimes.

Under reforms introduced by Cuban president Raul Castro in 2011, Cubans could buy and sell used cars from each other, but before Friday they needed government authorization to purchase a new vehicle or a second-hand one, usually a former rental car used in the country’s tourism industry, from state retailers, the only authorized car dealers on the island. Before the 2011 reforms, only those cars and trucks that were already in Cuba before the 1959 revolution could be sold on the open market. No private ownership of vehicles imported after the revolution was allowed by the regime. That’s the reason for the country’s fleet of 1950s and older cars, many of them American. In addition to being a rolling car show of American iron, Cuba is also effectively a museum of Soviet-made cars. The former U.S.S.R. was the Cuban regime’s greatest benefactor.

Outside of those Buicks and Ladas, newer cars in Cuba are likely to be government owned. Prior to the latest reforms, when the state was done with those newer cars, they were typically sold at relatively low prices to favored individuals like Cuban diplomats, doctors and teachers who worked abroad for the state.

The Cuban government still maintains a monopoly on the retail sale of new and used cars. There are about 650,000 cars in the country, about half privately owned and the other half owned by the state. The ban on importing cars and regulations requiring government approval has meant that only one in ten Cubans has a car, truck or motorcycle. The other 90% of Cubans rely of an increasingly deteriorating public transportation system. The government is rationalizing the high car prices as luxury taxes that it says will go towards improving public transit.

While the prices at the government car stores are exorbitantly high, the new and used cars that change hands privately in Cuba also have grossly inflated prices because demand so greatly outstrips supply.

For those who want to self-import a new or used car and avoid the markup, a privilege likely to be reserved for diplomats, foreign owned businesses operating in Cuba and select Cubans favored by the regime, will still need government permission.

The supposed liberalizing of car sales was one of more than 300 reforms approved in 2011 by the Communist Party, Cuba’s only legal political party. The reforms allowed more private initiative and less government control over personal property like homes and cars.

The result was a flowering of small businesses in Cuba, which along with thousands of farm, construction, transportation and other types of cooperatives, would have benefited from the opening up of car sales. Access to vehicles to transport their goods and services would have helped those enterprises’ and Cuba’s economic development, but the high car prices has put those vehicles out of their reach.

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29 Comments on “Cubans Hoping to Buy New & Used Cars Despair As Government Stores Add 400% Dealer Markup...”

  • avatar

    Hooray for communism! Who needs an embargo on this country when they so effectively manage to shoot themselves in the face?

  • avatar
    Volt 230

    They do the same with cell phone service, it is a govt run company that charges $40 USD per month for a limited talk/text plan, considering the avg Cuban makes the equivalent of $5.00 USD per month, only those with families abroad who send them money on a regular basis can even dream of getting a cell phone, and whom are you gonna call anyway, since the great majority of people cannot afford one?

  • avatar
    Rod Panhard

    sarcasm alert… I don’t understand how this could be…Michael Moore says they have a great health care system!!! And my liberal friends tell me that Cuba has a very high literacy rate. So maybe everybody is so smart they don’t need cars…. end sarcasm alert.

    • 0 avatar

      Cars don’t need healthcare. People need healthcare, and as the US healthcare system don’t cover everyone and the Cuban one does, it’s actually better. They’re even pretty good at educating doctors, and a lot of them now work in the US.

      Reality is not always black/white.

      • 0 avatar

        Yeah, but human needs don’t create human rights.

      • 0 avatar

        In the land of the blind, the one eyed man is king.

      • 0 avatar
        Rod Panhard

        You’re right Skog, reality is never black and white. What I don’t understand about your perception of the Cuban health care system is two-fold:
        1. If the Cuban health care system is so awesome, then why do my friends who still have family in Cuba send them medicine? We’re not talking about expensive chemo drugs, we’re talking about simple over-the-counter medications.

        2. Given how controlling the Cuban government is with information, why should we believe them when they tell us how well educated their populace is, and how terrifically smashing their health care system is? Most of us don’t believe our own government when they tell us this stuff. Why believe Cuba’s?

        If the currency is worth so little that the government can’t afford to pay for simple things, that Cubans have to scrounge for (like roofing nails), or make, or improvise, then how can the Cuban government afford simple things like centrifuges for blood tests in a lab, or x-ray machines, etc… stuff that my family physician used to have in his office, but no longer does because he can’t afford it. I’ll give you a clue though…his old equipment is not in Cuba.

        • 0 avatar

          You must be very smart Rod. I’m a Cuban and lived there until 2004. Health care is a joke. Good doctors there are, but they would run to me for help learning about latest treatment options since they can’t even connect to Internet. Once you’re diagnosed you can easily die because they have nothing but herbs to treat you. Still, Cuba exports pills… I’m sick and tired of the Michael Moore kind: so avid for the truth here and irritatingly naive when it comes to a third world dictatorship. That is the kind of government ruling Cuba. Nothing else. Thanks for taking the trouble to clarify, that should have been me. Much much appreciated. You might think it takes only common sense but it’s not so common.

  • avatar

    In Greece, they used to charge a 110 percent tax on cars which I thought was ridiculous. So a 20K dollar car would be 42K. This is beyond that. I tend to agree with the woman that said it will be used as a way to single out certain individuals that have the means. The government there knows how much money the people make.

    Question: What do the old American/Russian cars sell for (if ever offered)?

    • 0 avatar
      Volt 230

      Those used to be sold from owner to owner with govt involvement as well and would sell for what ever the market would bear, up to now you could not buy anything new and from this report, nothing will change.

  • avatar

    So let me get this straight…

    If the government gets involved in private enterprise, prices go up? Hmm. Odd.

  • avatar
    schmitt trigger

    Viva Cuba!!
    Viva la Revolucion!!
    Muera el Capitalismo!

  • avatar
    Volt 230

    Yeah,a 40% markup is a capitalist’s dream come true, oh wait! that is a non-capitalist govt.

  • avatar

    And I thought it was only evil, greedy capitalists that stuck it to the poor! Is my face red!

    You’re telling me that a wonderful, enlightened Communist government is, gasp… exploiting the toiling masses?!


  • avatar

    The car prices reflect the fact that the government’s official exchange rate for the Cuban peso is completely bogus.

    The average Cuban does not earn anywhere close to $20 per month, or whatever the official figure is. They actually earn a fraction of that amount; as was the case with the old Soviet-era ruble, the value of the currency on the street was a better measure of the currency’s worth, and the black market values are always well below the official ones.

    For the government dealerships to buy cars, they must obtain hard currency. The currency isn’t easy to come by, obviously, otherwise they wouldn’t have to charge so much. But when your population is earning just a few dollars per month — not $20 or so as the government would have you believe — then you end up with these seemingly high prices. A bogus currency peg can’t fix a broken currency.

    • 0 avatar

      Could you elaborate?
      That prices are not inflated, that revenues should be deflated instead?

      • 0 avatar

        The peso exchange rate is set by an official Cuba government peg. The government has decided that US$1 will buy you one “convertible peso” (tourist money), which is equivalent to 24 pesos in regular Cuban pesos. So in other words, the official exchange rate of a peso is about $0.04.

        But in practice, one convertible peso isn’t worth anything close to $1, and the local peso isn’t worth four cents. The black market would provide a more accurate reflection of the currency’s real value.

        In an unproductive closed economy, it’s possible to avoid some of the impacts of this currency peg. But that fails when buying imports, since the foreign producers need to be paid with some sort of real money, something that is scarce in Cuba.

        The black market value of a peso is just a fraction of the official value. If these peso prices in the article were converted at the more realistic black market rate, then the prices wouldn’t seem so outrageous to us, but the locals who have average incomes of just a few dollars per month still wouldn’t be able to afford them.

  • avatar
    Volt 230

    Actually if you visit there and turn in your dollars for the tourist currency they use, you get about 80 cents for your one dollar, so they have taken it upon themselves to devalue the dollar vs their worthless crap currency which cannot be used anywhere else in the real world.

  • avatar

    What would cars cost in North America if all the tax-funded subsidies were removed?

  • avatar

    What advantages does this motor car have over, say, a train? Which I could also afford.

  • avatar
    Volt 230

    I wonder how much I could get over there for my 98 Corolla? maybe as much as a new one here?

    • 0 avatar

      Consider a Peugeot is being offered for 262K. With that money I’ll get myself a GT40. If I were in Cuba and had that money (very very unlikely) I would simply send it out. Anybody with that kind of money would do the same. They won’t sell at those prices, they do know, they will just say anybody can buy cars, they just don’t have the money, like anywhere else… and some people will believe they’re a democracy. Or so they think

  • avatar

    Seems like motorcycles/scooters would be popular. Relatively small land mass and a mild climate, one could ride year ’round with few issues.

    That being said, I can see why people would want to leave.

  • avatar

    Hmmm ….

    Perhaps Cuba’s “intellectual” elite running the place should consider changing their USSR stereotype for Communism. The Russkies ditched their own system 24 years ago and reverted eventually to the tsar system of one completely self-absorbed idiot in charge operating on whims, who takes his shirt off to show his muscles. Oooh Vlad, you naughty boy!

    Meanwhile, the Communist Chinese figured out how to drag 150 million people up to a living wage in the same time period: sell plastic to America. Raul and the boys ought to grab their cellphones and call Peking for a bit of advice and foreign aid instead of following the 1960s Russian system. They could probably get a few Chinese cars really cheap.

    Of course, they could call Washington instead and make up with America. In about three years the place could return to being the den of iniquity and playboy/criminal heaven it was in 1957. Oh wait, that’s why they revolted in the first place – the CIA kept choosing their dictators for them.

    Choices, choices.

    I’m getting old enough that all the shrill passionate political bullshit from all sides makes me yawn. There’s always someone crawling to the top of the next hill, gazing upon metaphorical green grassy meadows lying beyond, and inspiring the herd to get themselves killed for a dream, while denigrating everyone elses dissenting opinion. All for about zero valid reasons.

  • avatar

    If the full list in the Havana times is to be believed there are some cars that are possibly within the reach of those that have support from foreign family members. Even those who have businesses down there could possibly swing one of the low end ones. I’m thinking of a family-run dive operation I frequent down there, which, between accommodation,diving, and tips must have top-line revenue figures of around $1000-1200 CAD per week in a good period. Though I don’t know the government’s rake is etc…

    The sadder thing is that if Cimex (Cuba’s largest company) is buying these on the international market and then selling them locally for worthless CUC it seems like a horrible waste of hard currency that could be used to buy the foreign products needed to prop up the failing infrastructure and lack of basic needs of its people(not ripping on Cuba, but I travel there frequently and hear this from the majority of the people I know down there).

  • avatar

    Its the same high mark up in Mexico – maybe its a Latin American thing?

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