November 2008 Car News - GBCarLoans.com

25th November 2008

Gordon's short-term fix for motorists, is little help

Little help for the motorist or dealers says HPI Valuations

Trevor Jones adds to the debate asking "Short term VAT gain for long term tax and NIC pain?"

HPI experts join forces with Trevor Jones to welcome moves to stimulate confidence in the motor industry, however Martin Keighley, HPI's Used Car Valuations expert, states that there is still confusion and a lack of confidence in the way Vehicle Excise Duty (VED) is going to be administered. VED changes on used car values and buyers of higher emissions cars remains to be seen.

The reduction in VAT; will provide some help to dealers with used sales on the VAT Margin scheme, but only by £25 per £1000 profit. Paul Brown, Tax Director for Trevor Jones said "It seems unlikely that the prospect of a cut of £425 in the price of a £20,000 new car, combined with the relatively minor impact of the personal tax changes announced, is enough to tempt hordes of buyers back into car showrooms."

Martin Keighley believes market confidence has been affected adversely firstly by the fact the VAT reduction is only temporary and secondly by proposed increases in Duty. Supporting this belief Paul Brown said: "The sting in the tail of course is that the VAT change is only temporary, and by 2010/2011 everyone, dealers included, will be paying for the Chancellor's rescue plan through increased levels of tax and NIC, both those announced now and those that may well drip through in time."

"Added to this, duty on petrol and diesel will increase in order to negate the effect of the VAT decrease on fuel. There was nothing to indicate this increase would be reversed when the VAT rate returns to it current level, meaning this will represent a real terms increase in duty from 1 January 2010.

Martin Keighley continues, "For whatever the reason, the differential between petrol and diesel has increased to 15p per litre. This means that unless you are driving roughly more than 10,000 miles per year, for most people the petrol will be the more economical choice."

Concludes Martin Keighley: "Unemployment will probably continue to rise, further reducing demand in the used market, and new car stocks are too high, hence supply will also continue to rise. These are the ingredients for a recipe of falling used car valuations and in turn, profits."

 

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