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Seepee

Member Since: 17 Apr 2007
Location: Derbyshire Dales
Posts: 100

VAT on 2nd hand cars in January

Could anyone enlighten me on the possible effects of the 20% VAT on the price of 2nd hand cars in the New Year?
Am I correct in thinking that it would be minimal as it is levied only on the margin between bought and sold price?
My budget is a smidge over £40K so a bit worried if I can't source anything suitable and under budget before the increase.
Thanks.
Chris

28th Dec 2010 3:49pm

JOKER

Member Since: 11 Sep 2008
Location: Sconnie Botland
Posts: 15876

maybe this might help ...

http://press.kelkoo.co.uk/20-vat-rate-woul...r-day.html

28th Dec 2010 3:58pm

Gazellio @ Prestige Cars

Member Since: 22 Jan 2010
Location: Chilterns, UK
Posts: 11309

Re: VAT on 2nd hand cars in January

Seepee wrote:
Could anyone enlighten me on the possible effects of the 20% VAT on the price of 2nd hand cars in the New Year?
Am I correct in thinking that it would be minimal as it is levied only on the margin between bought and sold price?
My budget is a smidge over £40K so a bit worried if I can't source anything suitable and under budget before the increase.
Thanks.
Chris

Dealers will pay 20% of the "Margin" on used Margin cars and 20% VAT on the difference between buying and selling price on "Qualifying" cars. Same amount of VAT in the end.

This may mean a small increase in used car prices to cover the increase but I cannot see it having any real effect.

28th Dec 2010 4:25pm

Seepee

Member Since: 17 Apr 2007
Location: Derbyshire Dales
Posts: 100

Mick,
Not really unfortunately as it doesn't explain what portion of the price of a 2nd hand car is VAT'able.
If it is just the profit margin then just an additional 2.5% onto say £4K-£6K so just £100-£150 which won't be much of an issue.

28th Dec 2010 4:28pm

letsavit2

Member Since: 16 Oct 2010
Location: essex
Posts: 854

Wait till spring if you can, IMHO i think there will be a nice (for you) drop in prices then, with the mild weather and fuel prices rising 4x4's will be less desirable. 2004 black Vogue TD6

28th Dec 2010 4:29pm

Seepee

Member Since: 17 Apr 2007
Location: Derbyshire Dales
Posts: 100

Hi Garry,
Sorry we crossed over,will you recover 20% VAT on your buy price in January or just at the old rate?
Cheers,
Chris

L,
Problem is that I'm paying penalty clause rate at 22p/mile on my current car so any savings will be wiped out unfortunately.

Last edited by Seepee on 28th Dec 2010 4:33pm. Edited 1 time in total

28th Dec 2010 4:31pm

Gazellio @ Prestige Cars

Member Since: 22 Jan 2010
Location: Chilterns, UK
Posts: 11309

Seepee wrote:
Mick,
Not really unfortunately as it doesn't explain what portion of the price of a 2nd hand car is VAT'able.
If it is just the profit margin then just an additional 2.5% onto say £4K-£6K so just £100-£150 which won't be much of an issue.

I think you will find that Margins are a tad lower than 4-6K !!!!

More like 1.5-3k in the used market up to about £35000 value. Auction and PX prices are high at the moment.

28th Dec 2010 4:33pm

Seepee

Member Since: 17 Apr 2007
Location: Derbyshire Dales
Posts: 100

Garry,
Pre or post haggling

28th Dec 2010 4:38pm

Gazellio @ Prestige Cars

Member Since: 22 Jan 2010
Location: Chilterns, UK
Posts: 11309

Seepee wrote:
Garry,
Pre or post haggling

Trust me that's what the margins average out at. Coincidently its about the difference between trade & Retail prices in Glass's Guide & CAP etc......

28th Dec 2010 4:42pm

Seepee

Member Since: 17 Apr 2007
Location: Derbyshire Dales
Posts: 100

But presumably much higher on the posted prices at LR AD's ,on the 1 I thought I had done a deal on last week we calculated the difference at £4K between trade and retail and ended up with a win win scenario at £2K give or take a a smidge

28th Dec 2010 4:54pm

Gazellio @ Prestige Cars

Member Since: 22 Jan 2010
Location: Chilterns, UK
Posts: 11309

Seepee wrote:
But presumably much higher on the posted prices at LR AD's ,on the 1 I thought I had done a deal on last week we calculated the difference at £4K between trade and retail and ended up with a win win scenario at £2K give or take a a smidge

Yes main dealer margins will be higher but they tend to give longer warranties and greater after-car service as well as having much higher overheads than independent traders. Everybody has the choice of paying a bit more if they want the (perceived at least) security of a Many Dealer after sales care.

Main dealer margins are nowhere near what they used to be though and most are now pricing their cars nearer the market average. My guess would be margins between 2-4k before after care in most cases.

28th Dec 2010 6:29pm

Seepee

Member Since: 17 Apr 2007
Location: Derbyshire Dales
Posts: 100

So to return to my original query the bottom line is that the January VAT increase should only have a negligible affect of circa £50 on the selling price
Thanks for all your help Gary.

28th Dec 2010 6:59pm

Gazellio @ Prestige Cars

Member Since: 22 Jan 2010
Location: Chilterns, UK
Posts: 11309

Seepee wrote:
So to return to my original query the bottom line is that the January VAT increase should only have a negligible affect of circa £50 on the selling price
Thanks for all your help Gary.

28th Dec 2010 8:20pm

Dogman

Member Since: 10 Dec 2010
Location: UK
Posts: 174

2007 Range Rover Vogue TDV8 Zermatt Silver

Hi Guys

Can anyone explain why, it seems, in the motor industry VAT is only added to the margin on a vehicle?

If I buy an item in then resell I pay VAT on my purchase price then charge VAT on my sell price, not VAT on the margin I apply to the item?

Just asking out of interest, or have I got this completely wrong?

Thx

28th Dec 2010 11:41pm

Gazellio @ Prestige Cars

Member Since: 22 Jan 2010
Location: Chilterns, UK
Posts: 11309

Dogman wrote:
Hi Guys

Can anyone explain why, it seems, in the motor industry VAT is only added to the margin on a vehicle?

If I buy an item in then resell I pay VAT on my purchase price then charge VAT on my sell price, not VAT on the margin I apply to the item?

Just asking out of interest, or have I got this completely wrong?

Thx

The scheme is designed to ensure fair VAT payment due to the fact that VAT is not added to used car prices and is therefore not collected in the same way as goods sold as say £3000 + VAT.

As a normal RETAILER (not used car dealer) you reclaim the VAT paid on acquiring goods you are actually only paying VAT on the margin or profit that you make.

Buy good for 10k + VAT (Reclaim 20% £2000) Sell at 12K + VAT (Pay VAT man 20% £2400)

Therefore you have effectively paid £400 equivalent to 20% of the MARGIN or profit.

Therefore the car scheme is identical it just calculates in a different way.

Also not all cars sold are "MARGIN" some are "QUALIFYING" (Business relief available) and attract VAT in the normal RETAIL manner but same amount is paid as stated above.

Hope that helps

29th Dec 2010 12:23am

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