Contents. 3 Company Profile YOU LL ALWAYS FIND THE RIGHT WAY. 5 The Group s Structure. 8 Our Worldwide Customer Core Values

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2 Contents YOU LL ALWAYS FIND THE RIGHT WAY 3 Company Profile 5 The Group s Structure 8 Our Worldwide Customer Core Values 10 Structure of the Governing Body 12 Company Organisational Structure 14 ŠkoFIN has been a Leader in Brand Financing for Cars for 20 Years Long-term Strategy Change Management Major Events in NUMBER ONE ON THE MARKET ONCE AGAIN 27 Products and Services 29 Fleet Services The Dealer Network and Its Financing 42 WE CARE ABOUT OTHERS TOO 44 Client Care 46 Human Resources 48 Central Purchasing 50 Sponsorship and Charity Activities 51 WE KNOW VEHICLE FINANCING INSIDE AND OUT 53 Financial Situation in 2012 Outlook for 2013 Shareholder s Meeting Report Independent Auditor s Report on the Annual Report 60 Independent Auditor s Report for the Financial Statements 63 Balance sheet 65 Income statement 67 Statement of changes in shareholders equity 68 Cash flow statement 69 Notes to financial statements Report on relations between related parties

3 YOU LL ALWAYS FIND THE RIGHT WAY Company Profile The Group s Structure Our Worldwide Customer Core Values Structure of the Governing Body Company Organisational Structure ŠkoFIN has been a Leader in Brand Financing for Cars for 20 Years Long-term Strategy Change Management Major Events in

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5 Company Profile It gives us great pleasure to be able to state that since its establishment in 1992 ŠkoFIN has maintained a leading position on the Czech automotive credit and lease financing market. This was again the case in 2012, as the Company demonstrated that lending and financial and operational leasing can be a successful business even in times of a sluggish Czech market. ŠkoFIN also once more confirmed its foremost position in the operational leasing category. We wish to continue this trend in future, of course, as we do not in any way intend simply to remain at the level we have already attained. On the contrary, we aim to continue developing our services further in the interest of our existing and future clients. Financing the purchase of a vehicle continues to play an essential role in the acquisition of new and used cars. In recent years, however, fleet financing through operational leasing also has grown in importance. ŠkoFIN is active in all three of these areas. Indeed, the range of our services is even more comprehensive and is continually being expanded to meet the needs of our existing and potential clients. An important key to success is the close co-operation both with the Volkswagen Group brands (ŠKODA, Volkswagen, Audi and SEAT) as well as with the Volkswagen Group dealer network. ŠkoFIN s portfolio includes the following standard products: Credit, which is purchase with loan repayment over an established time period. In taking a loan, the client need not spend all the cash at his or her disposal, but rather can keep some invested elsewhere and pay a portion of the car s acquisition price in instalments. We offer advantageous insurance along with this product. Credit also may be used to finance not only vehicles but also the operating and investment needs of Volkswagen Group car dealers. Investment loans are used to finance dealerships and service centres. Operational loans cover the actual funding needs of car dealers and provide financing for technologies connected with their sales and service activities. Financial Leasing is leasing with subsequent purchase of the vehicle. Advantages for the client lie in the reduced initial outlay upon acquiring the vehicle and the extended period for payment in fixed instalments. We also offer advantageous insurance as part of this product. Operational Leasing encompasses car lease inclusive of additional services and with the possibility of choosing the lease period. Thus the client need not worry about its car fleet as its expenses are spread out in the form of individual monthly instalments. This service is also offered 5

6 in the Full Service Leasing and Fleet Management variants. Factoring is a modern, flexible method of operational financing based on the assignment of accounts receivable. In assigning receivables, the car dealer becomes entitled to financing for up to 100% of their value. ŠkoFIN also uses this product to reinforce the financial stability of Volkswagen Group car dealers. Supplementary Products: The client centre offers current customers such additional products as complementary accident insurance and third party motor insurance, credit insurance (ŠkoFIN PPP), administrative legal protection insurance (ŠkoFIN Assistant) and other customer care services. In addition to products targeted to final customers, ŠkoFIN also offers services designed for fleet clients and bulk purchasers under the ŠkoFIN Fleet Services registered trademark. Besides standard loans plus financial and operational leasing, these include Full Service Leasing and Fleet Management. These services are gaining in popularity, not only among large corporations but increasingly also among smaller firms. Of course, our fleet services also encompass comprehensive analysis and advisory with the goal of maximising the efficiency of our clients car fleets. At ŠkoFIN, we strive hard to satisfy our customers needs and to ensure their satisfaction by enabling straightforward acquisition of a new or used car, even if the client s financial possibilities are limited. Our services are thus combined into economically advantageous packages which, in addition to financing, also include insurance and maintenance services. We know from experience that our customers value such comprehensive solutions for acquiring a vehicle, and we therefore intend to continue our efforts to serve our clients in this way. Our long-term goal is to maximise our clients satisfaction and loyalty, and not merely profits in the short term. That is why we pride ourselves on our outstanding orientation to the market, our well prepared strategy that is continuously fine-tuned to actual market conditions, the broad portfolio of appropriately adjusted products, and the customer-oriented approach of all ŠkoFIN employees. Our strategy includes to provide clients products with no additional fees, such as fees for concluding and administering a contract. It is our opinion that these are the essential factors that enable our company to retain its leading market position, positive brand recognition, and the satisfaction of our customers and business partners. More information is available at 6

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8 The Group s Structure ŠkoFIN s.r.o. is a fully owned subsidiary of Volkswagen Financial Services AG, whose history and experience date back to Volkswagen Versicherungsdienst GmbH (VVD) was the earliest predecessor of today s titan. That company, located in Wolfsburg, had as the subject of its business activity to intermediate the insurance of motor vehicles and to care for the customer in case of a loss. With the founding of Volkswagen Leasing GmbH in 1966, there was created the first German leasing company specialised in the financing of motor vehicles. The company was renamed Volkswagen Kredit Bank GmbH in 1973, and in 1975 it expanded its client portfolio through a merger, adding the car owners and dealers of the Audi brand. product (offering vehicle financing with low monthly instalments). The Volkswagen financial company gradually expanded to foreign markets, corresponding with the international activities of the Volkswagen Group, and it became a joint-stock company. In 1995, Volkswagen Bank GmbH became a subsidiary of Volkswagen Financial Services AG, which today is a fully owned subsidiary of Volkswagen AG. Since November 1990, Volkswagen Bank GmbH has offered Volkswagen/Audi credit cards; it was also the first autobank in Germany to offer EUROCARD and VISA credit cards. In 1994, its product line was further expanded to include, for example, the provision of general- -purpose loans and by introduction of the Autokredit 8

9 Volkswagen Group Automotive Division Financial Services Passenger vehicles Utility vehicles, Power Engineering Užitkové vozy Volkswagen Financial Services VOLKSWAGEN FINANCIAL SERVICES AKTIENGESELLSCHAFT Europe / Asia-Pacific / North and South America Financial Services USA / Canada / Spain / Argentina Remaining companies Scania Financial Services MAN Financial Services Porsche Holding Financial Services Porsche Financial Services 1) Fully consolidated as from 1 August ) Consolidation as from 19 July

10 Our Worldwide Customer Core Values Customer Orientation We offer convincing financial services that suit our customers individual needs, possibilities and opportunities. Our goal is to fulfil all of our customers wishes comprehensively, quickly and efficiently. Towards this end, we work hand in hand with our external partners. Top Performance Our intelligent financial services provide our customers financial flexibility. First-class results can only be achieved by demanding the best from ourselves. Therefore, we regard our employees professional knowledge as essential to ensuring the competence of the financial advice that we and our partners provide. Responsibility The low risk and loss measures in our customer receivables show that we are very careful and responsible in creating the financing schemes for lending to our customers. In cases of unforeseen events that might hamper a customer from fulfilling his or her financial obligations ensuing from the financing plan, we endeavour together with the client to find a responsible solution. Respect The purchase of an automobile represents an important event in our customers lives. We endeavour to render this purchase possible by providing custom-tailored propositions for mobility. We regard respectful behaviour, as well as efficient communication both within the Company and especially with our customers, to be of great and unequivocal importance. Innovativeness Our customers can rely on our products and services to reflect vast experience. Our know-how will continue to provide for innovative mobility solutions, flexible financing, as well as advantageous pricing. Creating Value We convey to our customers exceptional value in mobility, embracing both financial and automotive aspects. In many cases, this mobility is enabled through our financial service products. Their satisfaction is the distinctive value we receive in return from our customers. 10

11 Continuity We aspire to establish long-lasting partnerships with our customers. We consider fair conduct, reflected in the feeling that we can always look our customers in the eyes, to be the basis for satisfied customers and lasting corporate success. Customer satisfaction and the Company s success are interconnected values that guide us in everything we do! Customer Orientation Innovativeness Responsibility Top Performance OUR WORLDWIDE CUSTOMER CORE VALUE Continuity Creating Value Respect 11

12 Structure of the Governing Body ŠkoFIN s.r.o. was entered in the Commercial Register on 10 August 1992, having its registered office at Pekařská 6, Prague 5. The Company s primary business activities are purchase of goods for the purpose of their resale, sale (leasing) of automobiles, and provision of consumer credit. The structure of the statutory body as at 31 December 2012 was as follows: Jiřina Tapšíková, Statutory Representative Jan Kranát, Statutory Representative Jana Gregorová, Authorised Signatory 12

13 Ing. Jiřina Tapšíková, MBA Ing. Jan Kranát Mrs Tapšíková joined the Company in As a senior manager, she was responsible for ŠkoFIN Group s accounting department until 2003 and at the same time she was ŠkoFIN s authorised signatory. From 2003 to 2005, she was a director at the Volkswagen Financial Services AG Group s Turkish subsidiary in Istanbul. She has held the post of statutory representative of ŠkoFIN since 1 January 2006 and is responsible for managing the Company s financial and administrative operations. This area includes the Credit and Risk Management Department, Finance Department, IT Department, Legal Department, Human Resources and Internal Audit. Mr Kranát became ŠkoFIN s new statutory representative on 1 July 2011 and is responsible for sales, marketing and strategic development. Mr Kranát s entire career has been associated with Volkswagen Group. Before joining the Company he was marketing director of Volkswagen Bank in Russia. During he held the position of executive director of Volkswagen Financial Services for Russia. From 2003 until 2007, he served as financial director of Volkswagen Group in Russia. During he was head of the Controlling Department in Import Volkswagen Group in the Czech Republic. 13

14 Company Organisational Structure As at 31 December 2012, the Company s organisational structure was as follows: As at 31 December 2012 the Company was divided into the following departments: Ing. Jan Kranát, Statutory Representative Assistant Manager Sales and Marketing Department Administration Strategic Development Ing. Jiřina Tapšíková, MBA, Statutory Representative Secretariat Internal Audit Finance Department Credit and Risk Management Legal Department Human Resources Information Technologies Statutory Representative: Sales and Marketing: Administration: Strategic Development: Statutory Representative: Internal Audit: Finance Department: Credit and Risk Management: Information Technologies: Human Resources: Legal Department: Jan Kranát Luděk Šantora Radek Cizner Pavel Prokop Jiřina Tapšíková Václav Barbořák Jana Gregorová Radek Milštain Jaroslav Vacek Dana Formánková Ivana Hercová 14

15 Changes to the Organisational Structure in 2012: Pavel Prokop was appointed head of the newly established Strategic Development Department with effect from 1 April On 1 April 2012, Radek Cizner assumed leadership of the Administration Department, replacing Roman Bukač. Jaroslav Vacek took over leadership of the Information Technologies Department from Mr Pavel Švec starting from 1 June Newly established Central Purchasing Department under the Financial Department with effect from 1 July Ivana Hercová assumed responsibility for the Legal Department, replacing Tamara Janoušková with effect from 1 August

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17 ŠkoFIN has been a Leader in Brand Financing for Cars for 20 Years Four offices along the Vltava embankment in Prague, a single IBM computer and 25 employees were all that comprised ŠkoFIN in its first days on the Czech market in early June The Czech Republic had become the 11 th country in which company Volkswagen Financial Services AG had established a subsidiary with the objective of providing financial services to customers wanting to buy ŠKODA, Volkswagen, Audi and SEAT vehicles. From its very beginning, ŠkoFIN s basic philosophy has been to offer the client comprehensive services, from ordering a car to its financing, in co-operation with the sellers of Group vehicles. In addition to the share capital from the parent company, ŠkoFIN set up its own refinancing programme and initiated co-operation with Czech and foreign banks. A total of 3,243 contracts had been concluded before the end of In 1993, the Company shifted its focus from solely business entities and expanded its leasing offer also to individuals. Interest in financing from ŠkoFIN continued to rise, as confirmed by the more than 37,000 newly concluded contracts in The Company also made progress in the technological area and began to communicate with sellers online (the first online connection for contract submission was launched in 1994 with the Auto Bayer Slavkov dealership). That same year, ŠkoFIN expanded its vehicle financing offer to include operational leasing, gradually becoming the leader in providing this services. The volume of financed vehicles grew, new employees joined the Company, and in 1995 it celebrated its first major milestone the 100,000 th contract, which was concluded for a ŠKODA Felicia Combi GLX 1.3. The following year, the very successful ŠKODA Octavia was introduced to the market. In 1997, ŠkoFIN concluded its 200,000 th contract. This success was undoubtedly supported by a number of promotional offers conducted in co-operation with the Group s brands. In due course, ŠkoFIN responded to the needs of the corporate customers and began to focus on accompanying services related to maintenance of a vehicle fleet operational leasing including full service leasing and fleet management. As the premises on Krakovská Street (the Company s office since 1995) were no longer suitable for the growing company, it moved to a newly constructed building at Pekařská Street in the Prague neighbourhood of Stodůlky, where it has had its registered office ever since. As a token of solidarity, ŠkoFIN held a celebration of its ten-year anniversary in Český Krumlov, which had been damaged by flooding. Two hundred employees, from their own initiative, organised a fundraiser for the damaged city. To this 17

18 day, employees continue such charity activities through their support for three projects. The year 2002 was marked by the introduction of the first non-leasing product a consumer loan, which has become increasingly popular among customers. Since that time, ŠkoFIN has offered a wide range of products: loans, financial and operational leasing, dealer network financing and insurance. In 2003, the Company took over Rentex Financial Services, a major competitor in the fleet management segment, and reinforced its position in the operational leasing area. On 22 June 2005, the Non-Banking Register of Client Information was launched. As a co-founding member, ŠkoFIN contributed significantly to its formation. That year it also became apparent that clients interest was shifting to the loan area. The main reasons for this shift were the promotional offers for loans for new vehicles and increased interest in credit financing for used vehicles. Customers all over the world tend toward alternative vehicle financing instead of cash payments and favour service packages covering their various requirements. In February 2008, the Company concluded its 650,000 th contract. In the same year, it won the prestigious award Fleet Product/Service of 2008 for its product ŠkoFIN Online Operational Leasing. In 2010, a programme of change management was initiated in the Company in order to improve business results and the efficiency of the Company s operations. The pro-growth measures and newly established processes were validated in the following year by closing of the 800,000 th contract in December In its anniversary year 2012, ŠkoFIN also maintained its position as a leader on the Czech leasing and financing market in the area of passenger and commercial vehicles financing. Its key business partners include ŠKODA Auto, Porsche ČR and, of course, the dealership network, which constitutes its main distribution channel. 18

19 Sales Volume Employees Customers Profitability

20 Long-term Strategy In 2008, Volkswagen Financial Services presented its WIR 2018 Strategy, which is a part of the Volkswagen Group s global strategy The vision for this long-term strategy is to become the best provider of financial services in the world. The main goals of the WIR 2018 Strategy were presented to ŠkoFIN s employees in March Volkswagen aspires to sell more than 10 million vehicles annually by 2018 and become the world leader. The development of hybrid and electric cars also comprises a part of this plan. The strategy emphasises four chief pillars: employees, customers, sales volume and profitability. Employees The main focus here is the customer-oriented approach of employees. Our slogan is: We support our employees and at the same time demand the best from them. brands, we strive for a leading position in the quality of the products and services we offer end-customers and dealers in the Volkswagen Group s network. Sales Volume Our main focus continues to be on the financing of new and used automobiles of group brands with an emphasis on further expanding complementary services for customers. Our motto is: At least every second Volkswagen Group automobile sold will come with one or more of our financial services products. Profitability Competitiveness in terms of costs, productivity growth, and maximising profit are our chief goals in this area. Customers Our strong partners are key to our success in this area, be they group brands, dealer networks or our business partners. In providing financial support for sales of group 20

21 Change Management A process of change management was initiated at ŠkoFIN in 2010 with the objective of improving business results, increasing the efficiency of processes throughout the Company, boosting productivity, and thus fulfilling sales and financial targets established in the WIR 2018 strategy. In the past year, we dedicated great effort to sales processes, instituted standards for the work of regional representatives and fleet acquirers, and introduced a concept for training sellers that concluded with certification. We strengthened the team of regional representatives from 8 to 12 members and newly defined the individual regions. Our main distribution channel is the dealership network, and therefore a properly constructed commission and motivation system and an unequivocally professional ŠkoFIN sales team are keys to success. Fleet financing is becoming increasingly important each year. In 2012, operational leasing accounted for 35% of new business. We see potential for further growth in this area. During 2012, we also set up new product lines reflecting the needs of fleet customers in individual segments. We focused last year, too, not just on new customers, but also on current clients. For our clients we prepared a retention campaign, through which we reached some 16,000 selected customers for whom we prepared a gift and an offer of advantageous financing. A central purchasing department was established in the same year with the objective of improving the effectiveness and transparency of purchasing processes while of course optimising costs. The Strategic Development Department was also established at the same time, focusing on the Company s strategic direction, management of important projects, and process and product management aimed at reducing administration and increasing productivity. Its key tasks undoubtedly include fulfilling the Group s WIR 2018 strategy defined by the parent company Volkswagen Financial Services AG in We established a new concept of key performance indicators (KPIs) for the entire Company tied to strategic objectives and key projects, with the objective to increase employee motivation, more specifically define and evaluate their tasks, and make remuneration more transparent and comprehensible. 21

22 A clearly defined business strategy including suitably selected products, target groups, distribution channels and a properly set price policy is no longer enough. A company that wants to increase its competitiveness must have its key processes well defined and described. The Operating Excellence project established in 2012 aims to streamline and improve the effectiveness of processes and resources management throughout the Company while efficiently using human potential. 22

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24 Major Events in 2012 ŠkoFIN concludes its 800,000 th contract In 2012, ŠkoFIN passed the milestone of 800,000 contracts. The 800,000 th contract was concluded on 12 December 2012 at the Autostyl Trutnov dealership. This confirmed both the growth in new business as compared to 2011 as well as the number of clients who turn to our company with confidence in questions of vehicle financing. Since the Company s founding in 1992, we have endeavoured to provide our customers with the highest quality financial products and services while continuously introducing new solutions that correspond to the changing market situation and our clients requirements and wishes. We regard the closing of the 800,000 th contract as a demonstration of consumers trust in our company and their appreciation of our high-quality services. This figure represents more to us than merely a number in a table measuring business performance. Each and every unit contributing to this sum represents a specific person or entity for which we have intermediated the purchase of a new or used vehicle. Want a birthday car? On 25 September 2012, we launched a marketing campaign on the occasion of the 20 th anniversary of ŠkoFIN s operation on the Czech market. The objective was to accentuate the Company s unrivalled offer for acquiring a new or used vehicle from Volkswagen Group. The campaign s key message communicated a special offer for financing with 0% interest and zero fees. Moreover, the first 2,000 customers were to receive as a gift a CCS card in a value of CZK 2,000. The campaign focused especially on key moments in the customer s decision-making process when acquiring a new car. Combining a simple yet creative idea and an exceptional offer, its main objective was to boost the number of contracts concluded with new clients. The celebration of the 20 th year of ŠkoFIN s successful operation on the market in the uncontested numberone position provided an opportunity to casually and amusingly promote the current highly advantageous and attractive offer a car loan with 0% interest and no fees. 24

25 The campaign s main message was presented by two entertaining Zeroes. They communicated ŠkoFIN s offer through short songs and could be seen also in brief videos on the ŠkoFIN microsite as well as on ŠkoFIN s YouTube channel. The communication mix was selected in order to acquaint potential clients with the exceptional offer before they had secured the funds at a bank, for example. The key communications channels were chosen together with the Mindshare media agency and included online, radio, print, traditional and nontraditional outdoor, and video advertising. Nor did we neglect points of sale and dealerships, for which we prepared special POS materials and a competition for the best sellers as part of the campaign. AUTO? SFOUKNùTE TO S NÁMI! Nula úrok. Nula poplatek. Jen do

26 ŠkoFIN celebrated 20 years on the market In mid-june, ŠkoFIN and its business partners celebrated the 20 th anniversary of the Company s establishment. Following a short retrospective of years past, those in attendance were treated to a unique afternoon programme at the Pilsen brewery, where they had the opportunity to taste unfiltered beer draught directly from oak casks and visit the production areas of the brewery. The day was then capped off with a gala evening at the Parkhotel Pilsen. The evening programme included a concert by the band Olympic, special performance by Roman Vojtek s Fantastic 80 s group, and fireworks. Thanks to our employees Twenty years of operation on the Czech market was of course celebrated also with our employees, who are the driving motor of our success. The anniversary celebration took place in sporting spirit. After a business meeting on company premises, we took off together for the Freestyle Park in Modřany, where a teambuilding and amusement programme awaited us. Although some activities may have seemed demanding at first glance, everyone managed them in the end. The notional cherry on top of the cake was a concert by the band Chinaski after the Eddie Stoilow group. 26

27 NUMBER ONE ON THE MARKET ONCE AGAIN Products and Services Fleet Services The Dealer Network and Its Financing 27

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29 Products and Services We have been number one on the finance and leasing market since our establishment, thanks to the wide range of products and services offered to our clients and directed to purchasing new or used cars of both Group and non-group brands. Our clientele, whether business clients, companies or private individuals, may choose from a comprehensive range of products and services to best suit their needs and possibilities, including packages combining financing, insurance and maintenance services so that every client receives an offer that corresponds to its needs. 29

30 Financing with ŠKODA Finance Acquiring a new ŠKODA car in 2012 was made easy thanks to ŠkoFIN s brand financing. We prepared advantageous financing offers for all models of this brand for both regular clients and new customers. The attractive loyalty programme with the slogan Loyalty pays off! for ŠKODA car owners continued in Clients were thus able to acquire a ŠKODA Fabia or ŠKODA Roomster at a CZK 40,000 discount, and at even as much as CZK 60,000 off with a loan from ŠkoFIN. Loyal customers also could trade in a used ŠKODA car for a new one under advantageous conditions and with a free extended warranty. With roll-out of the brand new ŠKODA Citigo model, we prepared in co-operation with ŠKODA AUTO an advantageous financing offer: a loan with a very low interest rate thanks to which the client could acquire a new car for as little as CZK 95 per day, including accident and third party motor insurance. The five-door version VYBERTE SI SVÉHO CHAMPIONA S turbomotorem TSI již za Kč ŠKODA Fabia Champion 1,2 12V HTP/44 kw již od Kč splátka Kč/měs. Další motorizace: 1,2 12V HTP/51 kw 1,2 TSI/63 kw 1,4 16V/63 kw ŠKODA Fabia Combi Champion 1,2 12V HTP/44 kw již od Kč splátka Kč/měs. Další motorizace: 1,2 12V HTP/51 kw 1,2 TSI/63 kw 1,4 16V/63 kw ŠKODA Roomster Champion 1,2 TSI/63 kw již od Kč splátka Kč/měs. Další motorizace: 1,4 16V/63 kw Ilustrativní fota FANDIT NAŠIM SE VYPLÁCÍ Akční bonus Kč získáte, pokud se rozhodnete pro koupi nového vozu ŠKODA Fabia nebo Roomster v edici Champion prostřednictvím výhodného úvěru od ŠkoFINu. NOVÁ ŠKODA CITIGO ZDARMA NEBO ZA 95 Kč DENNĚ! Právě teď můžete zkusit své štěstí v tipovací soutěži na Dnech testovacích jízd ŠKODA o 3 nové vozy Citigo anebo vsadit na jistotu s výhodným úvěrem od ŠkoFINu. Otestovali jste už nový vůz ŠKODA Citigo? Může být jen a jen váš, pokud se správně strefíte v tipovací soutěži pro účastníky Dne testovacích jízd ŠKODA. Každý výherce jednoho ze 3 vozů navíc získá od ŠkoFINu kartu na pohonné hmoty v hodnotě Kč zdarma. A pro všechny ostatní máme akční nabídku financování od ŠKODA Finance, se kterým může být nový 5dveřový vůz ŠKODA Citigo váš již za cenu 3dveřového, a to navíc s paketem Plus zdarma. Více informací: tel