Why are car prices generally higher in Europe than in the United States?

Question

Why are car prices generally higher in Europe than in the United States?

In: Economics

Answer 1

MSRP in Europe includes VAT, which ranges from 17% in Luxembourg to 25% in Sweden. (Edit: also, cars built outside the EU are subject to 10% duty. The U.S. rate is 2.4% and CA/MX are exempt.)

Once you’re comparing pre-tax prices, cars in Europe tend to be cheaper to start than the same model in the U.S. because options and engine upgrades that are standard in the U.S. are often optional in Europe.