Will Vehicle Prices in Sri Lanka Decrease Next Year?

When discussing vehicle prices in Sri Lanka, next year—that is, 2026—is going to be a very critical year. With decisions taken by the Government and the Central Bank regarding vehicle imports, several significant changes are set to occur in market prices. Let's discuss this simply and clearly under a few key points.

Relaxation of Import Restrictions and Market Supply

Since vehicle import restrictions were largely relaxed in 2025, the influx of Brand New & Unregistered vehicles into the market is reaching a peak by next year. According to Central Bank forecasts, the heavy pent-up demand that existed in 2025 is expected to slow down to some extent by 2026. This implies that there is a tendency for prices to drop by a certain amount due to an oversupply of vehicles that cannot be sold quickly.

Impact of Tax Policy

The main factor determining vehicle prices is government tax. If the 50% surcharge imposed in 2025 is not extended after February 2026, there is a possibility that the customs duty charged on vehicles will drop from 30% to 20%. This is a positive sign for price reduction.

However, on the flip side, reports suggest that the government plans to introduce new taxes such as the Social Security Contribution Levy (SSCL) through the 2026 Budget and remove the existing 15% Tax Discount on vehicle imports. If this discount is removed, the prices of even small vehicles could increase by several lakhs.

What Will Happen to Used Car Prices?

In the recent past, used car prices in Sri Lanka were at an unreasonable level. However, with plenty of new vehicles available in the market next year, it will be difficult to sell old vehicles (e.g., Wagon R, Vitz, Alto) at very high prices. Economic analysts state that used car prices could drop significantly, specifically by around Rs. 10 to 15 Lakhs.

Other Factors Determining Prices Next Year

The following factors will also influence whether prices increase or decrease:

• Dollar Value: If the Rupee strengthens further, vehicle prices could drop further.
• Leasing Interest Rates: If bank interest rates decrease, people will be encouraged to buy vehicles, increasing demand and potentially stabilizing prices.
• LTV Ratio: Since the required upfront payment when buying a vehicle has been increased, purchasing power is limited, which can influence prices to drop.

In short, while the prices of used vehicles are likely to drop significantly in 2026, the price of new vehicles will be decided based on the new taxes imposed by the government.

Additionally, prices might increase slightly due to taxes after April 2026. Therefore, if you are buying a new vehicle, it might be advantageous to buy before then. However, since there is a trend for used vehicle prices to drop significantly, it might be advantageous to wait a little longer for those.