Regulation on the Trade of Second-Hand Motor Vehicles and Recent Regulations

In this recent period, rapidly rising inflation and exchange rates, coupled with a low-interest rate policy, have increased the demand for property by capital owners or those willing to borrow with low-interest loans. While the ongoing chip and production-related supply problem in automobiles has made it difficult or even impossible to find a zero-kilometer car, the surge in demand has created unprecedented problems for both the new and second-hand car market. While prices above the list prices are demanded for zero-kilometer cars, second-hand cars have started to be traded at prices higher than the list prices of zero-kilometer cars. Moreover, the continuous increase in automobile prices, which increased almost 10 times between 2020 and 2023 and almost 2.5 times between 2022 and 2023, together with stockpiling and similar problems, led to an excessive increase not only in short-term gains from buy-and-sell transactions but also in second-hand vehicle prices in general. This made it difficult for genuine consumers or those in need to access vehicles and increased informality. Especially in 2022 and the first half of 2023, the unavailability of vehicles at authorized dealers was not off the agenda. However, sales somehow continued.

The almost uncontrolled exploitation of this situation in the market by authorized dealers, dealerships, and citizens, resulting in very high profits, has led to the necessity for the legislator and the relevant ministries to make a regulation on this issue.

In this context, the Ministry of Trade (“Ministry”) (then known as the Ministry of Customs and Trade) made several regulations in 2020, 2022 and 2023 in the Regulation on the Trade of Second-Hand Motor Vehicles (“Regulation”), which was issued by the Ministry based on the Law No. 6585 on the Regulation of Retail Trade and entered into force after being published in the Official Gazette dated February 13, 2018 and numbered 30331.

Amendments Introduced by the Regulation

As its name suggests, the Regulation sets out the procedures and principles regarding the second-hand motor vehicle trade. Whilst the Regulation regulates the second-hand motor vehicle trade activities of real or legal person merchants and tradesmen or craftsmen, the obligations of businesses engaged in second-hand motor vehicle trade, the conditions sought in collective workplaces and vehicle markets, payment methods in second-hand motor vehicle trade, with the addition made in 2023, it also stipulates the rules and obligations regarding second-hand motor vehicle advertisements.

The Regulation defines second-hand motor vehicle trade as "the whole set of activities related to the sale and marketing of second-hand motor vehicles carried out directly or through intermediation".

Under the Regulation, second-hand motor vehicles may only be traded by companies holding an authorization certificate. In addition, with the amendment made in 2020, it is regulated that the sale of more than three second-hand motor vehicles within a calendar year, either directly or through intermediation, shall be considered as second-hand motor vehicle trade unless otherwise determined by the Ministry. While the conditions under which and how to obtain an authorization certificate are written in Article 6 of the Regulation, it is also specifically stated that it cannot be transferred.

While the Regulation was in a general regulatory structure for those who wanted to engage in the second-hand vehicle purchase and sale business from 2018 until 2020, it has become a regulator of the market, advertisements, and even the purchase and sale transactions made by citizens since 2020.

As per the amendment made in 2020, a radical regulation was implemented in order to eliminate situations that would cause damage to rights and benefits during the buy-and-sell transactions by introducing the obligation of expertise in the purchase and sale of second-hand vehicles. Due to the increase in manipulations and informality in the market, amendments containing detailed regulations continued.

One of the most important amendments to the Regulation was made in 2022, which introduced time and mileage restrictions for the sale of second-hand vehicles in order to prevent the higher price and immediate sale of zero-kilometer cars purchased from authorized dealers. Pursuant to Provisional Article 2 of the Regulation, “those engaged in the second-hand vehicle trade may not directly or indirectly engage in the marketing or sale of automobiles and vehicles before 1/7/2023 unless six months and six thousand kilometers have elapsed since the first registration date of the vehicle.”

In 2023, the scope of the Regulation was once again expanded. Through this regulation, the number of actions to be considered as second-hand motor vehicle trade has been increased and adjustments regarding advertisement websites have been included. It is aimed to prevent fake advertisements and people from advertising vehicles that they are not authorized to sell.

Another important amendment made in 2023 concerns authorized dealers who sell zero-kilometer cars. Accordingly, in the event that an entity engaged in the trade of first registration motor vehicles engages in activities that make it difficult to access the first registration motor vehicles, such as avoiding sales, demanding a price above the sales price recommended by the manufacturer, or distributor, forcing the consumer to purchase accessories or making a trade-in, or setting the trade-in price significantly below the market price, the authorization certificate shall be revoked.

Especially in 2023, due to the increase in sales made without showing the actual sales price, the abuse of advertisement websites to create a market, the existence of people who do this business despite not having a trade name, and as a result, exceeding of the second-hand prices over the prices of zero kilometer vehicles, an amendment was made to the Regulation and the following article was added: “Second-hand motor vehicles cannot be marketed through advertisements at a price above the current sales price recommended by the manufacturer or distributor until 1/1/2024." In addition, the scope of the Regulation has been expanded for everyone by stating that "The marketing of second-hand motor vehicles through advertisements at a price above the current sales price recommended by the manufacturer or distributor shall be deemed as second-hand motor vehicle trade in terms of the application of this article.” Accordingly, the scope of the Regulation has been expanded for everyone and it has been regulated that selling above the list price shall mean trading within the scope of this Regulation and shall be subject to the regulations and sanctions pursuant to the Regulation, in other words, administrative fines may be imposed in case of violation of the regulations introduced by the Regulation.

In its statements, the Ministry stated that individual and corporate sellers who sold more than 3 second-hand motor vehicles without an authorization certificate in 2023 were detected and their defenses regarding the sales were requested.

Conclusion

Türkiye’s financial conditions, rising exchange rates since 2018, rising inflation, and the manufacturing and chip crisis that came along with the pandemic have also negatively affected the motor vehicle market. As a result of the low-interest rate policy despite rising inflation, the second-hand motor vehicle market experienced one of the most active periods in history, as capital owners and those seeking to acquire the property using low-interest rates increased the demand for motor vehicles.

In order to prevent malicious practices and unfair gains, the Ministry, in response to various complaints and regulatory requirements, made successive amendments to the Regulation, expanded the scope of the Regulation, included those who engage in this business despite not having a trading name within the scope of the Regulation and stipulated sanctions along with the amendments.

In particular, the Regulation has subjected the advertisements given on advertisement websites to audit, and stipulated serious sanctions, up to and including the revocation of authorization certificates, for authorized dealers due to vehicles with prices much higher than the list price despite being zero kilometer. In addition, by restricting the sale of second-hand vehicles on the basis of time and mileage, an attempt was made to prevent unfair and untaxed gains through buy-and-sell transactions.

In the automobile market, demand continues to rise. 2023 has already become the year with the highest number of cars sold of all time. However, as supply also increases, prices in the second-hand market drop and normalize. The regulations envisaged through the Regulation are a spontaneous result of the interest rate hike policy pursued in the second half of 2023 and the contraction in credit supply.