Motorists to be Hit With VAT Increase on New Cars

Car buyers who don’t order their new cars in the next couple of weeks will be hundreds of pounds worse off as they sleepwalk into the VAT increase.

With average delivery times stretching to two months, new cars that are not ordered within weeks are likely to be handed over and paid for after the new year VAT increase, needlessly costing their buyers quite large sums.

The much-heralded Scrappage Scheme, though extended, is not expected to last much into the new year, either.

Tim Wait, Director of CarQuake, the UK’s foremost new car website, comments: “At the moment, thousands of new car buyers are walking blindly into substantial losses. On a £20,000 car, the January change in VAT alone could easily be worth a the equivalent of alloy wheels, front and rear parking sensors or metallic paint finish, while the end of Scrappage could make a substantial difference to the type of car they can afford. And all they have to do is buy now, to avoid paying later.”

‘Buy Now, Don’t Pay Later’
On January 1, 2010, VAT is to be restored to 17.5%, with the biggest impact on high ticket purchases such as new cars. On average, the VAT change will push up the price of a £20,000 car by around £500.

“Many new car buyers don’t realise how important timing is,” continues CarQuake’s Tim Wait. “If you order a car in December and it’s delivered in January, you’re likely to be making your main payment in January – whether it’s cash or on credit. And therefore you pay January’s VAT. And the time to avoid that scenario is now.”

Buying now can still also be best advice in general car pricing. Wait adds: “Retailers have been faced with downward pressure on prices: survival means they’re now much more competitive. But manufacturers are pushing prices up. And as Scrappage comes to an end, the new year won’t just see higher VAT but also higher retail prices.”
Speaking for the consumer, Tim is quick to point out that there are some very good reasons to buy a new car in the next 4-6 weeks…

  • Only 15% VAT to pay if you buy your new car before the end of 2009
  • Strong second hand market for used cars, ensuring that you get a good part exchange price
  • The opportunity (where appropriate) to participate in the government Scrappage scheme which has been extended for a further 100,000 vehicles but is likely to run out by the end of the year
  • The possibility of avoiding manufacturers’ 2010 price increases

He concludes: “Based on our experience, we recommend that consumers act while market conditions are so favourable, a condition that only has a few more weeks to run. The future promises higher car prices, higher interest rates and higher VAT. Our advice is definitely: Buy Now – Don’t Pay Later.”


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