Pitfalls, frauds, and how to drive safe

November 27, 2023 Dredan Njau, Kaunga Junior and Maryline Josephine

Navigating Kenya’s realm of car dealerships unveils a playground for cunning local tricksters seeking an undeserved livelihood. “Watu wanakapitia huku nje through fake car dealerships. Cons wako kila mahali sio car dealership pekee,” Edwin Muthomi, who runs Somiek Cars, a vehicle dealership explains to Maudhui. Despite diligent safety measures, a handful of deceitful individuals manage to slip through, weaving unpleasant narratives within.

Both those opting for imports and those favouring local purchases find themselves ensnared in fraudulent schemes. In the case of imports, the trap is set when one ventures into procuring a vehicle from overseas through online car dealership platforms. Imagine ordering a car from abroad—initially, you’re required to pay an order fee, a sum intricately linked to the car’s type and specifications. This fee constitutes a portion of the deposit, a figure determined by a percentage. Subsequently, the down payment follows suit.

A waiting period ensues, with anticipation building for the impending delivery. Yet, it is during this period that the artistry of the conman is unveiled. The wait extends beyond the stipulated timeframe, and the customer, now growing uneasy, starts discerning irregularities. As the designated arrival date approaches, the expectation is for the down payment to be settled—a potential ploy in the conman’s playbook.

In today’s market landscape, many individuals are gravitating towards local dealerships, spurred by a pervasive fear of fraud. Yet, the perceived haven of local sellers is not immune to its own set of pitfalls. Enter the realm of so-called brokers, ubiquitous in their presence. Prices soar, and one finds themselves shelling out for what hardly justifies the cost.

The realm of local sellers isn’t just plagued by inflated prices; authenticity itself becomes a concern. Some unscrupulous individuals peddle cars with dubious backgrounds—stolen or lacking the owner’s consent. Faced with such deceit, customers increasingly turn to the Directorate of Criminal Investigations (DCI), embarking on a process known as tape lifting. This involves a meticulous examination of the car’s details, such as the chassis number and ownership particulars, to authenticate its legitimacy and condition.

Importing a car in Kenya

Embarking on the journey of importing a car to Kenya unfolds as a meticulous dance through a sequence of steps, adhering to regulations laid down by authorities like the Kenya Bureau of Standards (KEBS) and the Kenya Revenue Authority (KRA).

The initial step involves selecting the source from which you wish to import and choosing a vehicle to your liking—considering factors like make, model, color, desired mileage, and budget. While a myriad of cars floods in from various corners, it’s noteworthy that a significant portion of imported vehicles in Kenya traces its origins back to Japan.

Once you’ve set your sights on a particular car, enlisting the assistance of a reliable clearing and forwarding agent is a prudent move. These professionals navigate the complexities of documentation, customs clearance, and logistical intricacies. The journey unfolds with a discussion of options—ranging from auctions and in-house sales houses to direct showroom purchases. Subsequently, the car’s condition is meticulously scrutinized, utilizing auction sheets and, if necessary, physical inspections in Japan.

Now comes the nitty-gritty—the point where you delve into the intricate details that make up the total cost of your desired vehicle. It’s a comprehensive breakdown, factoring in the total CIF cost, import duty, shipping fees, port charges, clearing fees, agency fee, and a sprinkle of miscellaneous costs.

As you venture into purchasing the car through different dealers, a commitment fee (deposit) becomes the initiation point for the buyer. This is the point where legally binding sales agreements come into play, mapping out not just the financial commitment but also sketching the payment schedule.

A mandatory pit stop in the process is the Inspection & Shipping Preparation from KEBS. It’s more than just a formality—it kickstarts the de-registration process of the car, priming it for the next available vessel for shipping.

The maritime journey unfolds, and depending on various factors, your vehicle docks in Mombasa after a span of weeks. Now, the Kenyan teams take the reins, steering the car through the clearing process and facilitating its local registration.

The bureaucratic dance continues with registration at the KRA, acquisition of insurance, a roadworthiness inspection, and the procurement of custom number plates. Ongoing compliance becomes the name of the game—annual inspections and road tax payments ensure the continuous legality of your imported vehicle. Staying in the know about regulatory changes is crucial, making periodic checks with relevant authorities a prudent move throughout the importation saga.

The web of taxes

Ah, the taxes—an unavoidable chapter in this importation tale. Import duty takes the stage at 35 percent (except for ambulances and hearses) effective from July 1, 2023. Calculated as a percentage of the car’s customs value, the duty’s rate dances with factors like the vehicle’s age, engine capacity, and make.

Excise duty takes its turn, a variable dance between 20-25 percent, with electric vehicles enjoying a 10 percent groove. It’s another levy based on the car’s value, encapsulating customs value, import duty, and other taxes thrown into the mix.

Value Added Tax (VAT) struts onto the scene, standing tall at 14 percent. In a land where the standard VAT rate is 16 percent, this component plays a significant role in the grand total of taxes during the importation spectacle.

Not to be overlooked, the Import Declaration Fees (2 percent) and the Railway Development Levy: 1.5 percent make their cameo. The latter, a nod towards the development of railway infrastructure in Kenya, adds its own note to the symphony of importation taxes.

Delving into the realm of calculating your import duty unveils a process intricately choreographed by the KRA. Central to this is the establishment of the Current Retail Selling Price (CRSP) of your vehicle, a metric laid out in the 2019 CRSP by the taxman.

Tailoring our focus to the realm of prestige cars, frequently imported by our clientele, we’ve curated a bespoke Prestige Car Duty Calculator, explains Edwin of Somiek Cars. This tool aims to empower you in crafting an accurate estimate for the duty your cherished vehicle will incur.

Most taxed cars

Identifying the “most taxed” car in the Kenyan importation scene involves navigating a landscape of variables—chiefly the car’s value, engine capacity, and age. In broad strokes, luxury cars boasting higher values, larger engine capacities, and recent models bear the brunt of elevated taxes. This tax symphony comprises import duty, excise duty, and the VAT.

Import duty rates are a dance, shifting in harmony with factors like the car’s value and model year. Excise duty takes its cue from the engine capacity, with heftier rates reserved for larger engines. VAT, standing as a percentage of the customs value, import duty, and excise duty combined, completes this trio of importation taxes.

The landscape of importation has witnessed a dip, attributed to the imposition of a 35 percent tax hike. This fiscal shift has ushered in a surge in the local purchase of cars, fueled by the allure of relatively attractive prices.

Yet, the allure of importing persists. Despite the perceived complexity, many car buyers in the country find merit in the process. Importing carries the reputation of being more cost-effective than local purchases, escaping the markup imposed by local dealers. Moreover, the flexibility to modify and address necessary repairs post-delivery ensures that the imported vehicle aligns with the safety standards of Kenyan roads, known for their unique challenges.

Importing also opens up a world of options. The extensive array of vehicles to choose from may present a paradox of choice, but it undeniably offers a buyer a satisfying range of possibilities.

When it comes to used cars, the imported variety often shines in terms of quality. The meticulous maintenance they undergo positions them as a favourable choice over locally used cars. This not only enhances the driving experience but also translates into long-term savings on spare parts and repairs. The allure of importing extends beyond the numbers, resonating with the desire for variety, customization, and quality on the roads of Kenya.

Yet, the story takes a turn when it comes to imported used cars, sometimes unveiling unexpected complications—a dent not disclosed in the advert, a surprisingly high mileage record, or other mechanical hitches that spring up, translating into unforeseen expenses.

Electric vehicles

Shifting gears to the more environmentally conscious side of the automotive spectrum, the National Transport and Safety Authority reports a modest count of approximately 1,350 electric vehicles registered in Kenya as of this February. Adding to this eco-friendly movement, the Energy and Petroleum Regulatory Authority (EPRA) has given the green light for the importation of Tuk Tuks, poised to become a popular choice for urban mobility.

This snapshot illuminates the limited presence of electric vehicles in the import scene, with motorcycles dominating the count. Buses and Tuk Tuks make cameo appearances, with players such as Metro Trans already deploying electric buses in their fleet. However, the narrative holds a promise of growth in these numbers over the coming years. The anticipation hinges on the expectation that more incentives and policies will be rolled out, fostering the widespread adoption of electric vehicles across the country. The road ahead holds the promise of a greener, more sustainable automotive landscape for Kenya.

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