Article date: 25 November 2008
- Trevor Jones adds to the debate asking "Short term VAT gain for long term tax and NIC pain?"
Vehicle information experts, HPI join forces with Trevor Jones to welcome moves to stimulate confidence in the motor industry. But, warns Martin Keighley, HPI's Used Car Valuations expert, there is still confusion and a lack of confidence in the way Vehicle Excise Duty (VED) is going to be administered. The effect of VED changes on used car values and buyers of higher emissions cars will remain to be seen.
Overall market confidence has been buoyed by the reduction in VAT; this will provide some help to dealers with used sales on the VAT Margin scheme, but only by £25 per £1,000 profit. Paul Brown, tax director for Trevor Jones believes that whilst on an item-by-item basis the cut may be relatively small it will have a positive impact on the spending power of all but the least well off. However, he adds: "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."
Furthermore, Martin Keighley believes overall market confidence has been dented first by the fact the VAT reduction is only temporary and secondly by proposed increases in duty, with a vast increase in borrowing being encouraged by the Chancellor. This is supported by Paul Brown: "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 the debate: "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."
Overall the impact of the budget on the motor trade will largely depend on whether it has the desired effect of stimulating immediate demand within the economy. Whilst the measures are welcomed, overall motor trade profitability will hinge on whether the economy recovers according to the Chancellor's timetable. 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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Notes to editors:
*About HPI Valuations
HPI's valuation service is offered in partnership with used vehicle experts Vehicle Information Publishing Ltd (VIP) who have provided current and forecast used values for cars and light commercials for over four years. As well as Fleets and Dealers, their customers include What Car? and Wisebuyers. VIP was founded by Martin Keighley and Alan Senior who together, spent more than 35 years working for CAP Motor Research. VIP launched the TraderGuide book in 2005 and then the PC application VIPDATA (www.vipdata.co.uk/) in 2007, providing values for over 30,000 vehicles.
Originally established in 1938, HPI Limited is a primary source of vehicle information for the UK motor industry and motoring consumer, which since August 2004 has been owned by Norwich Union. HPI encompasses both the HPI database of all UK road registered vehicle descriptions and histories, and the National Mileage Register which holds in excess of 125 million mileage readings.
Together, HPI and NMR represent the UK's largest vehicle information source, combining and interpreting data from government agencies, industry bodies, private organisations, the police and the general public. Registering with HPI helps companies to protect their financial interests in motor vehicles and a wide range of other mobile assets. HPI Checks give purchasers instant confirmation of whether vehicles are correctly described, known to be subject to outstanding finance or serious accident damage, or recorded as stolen or "clocked".
"HPI" and the HPI logo are registered trademarks of HPI Limited.
(1) All prices include VAT and are correct as of 1 January 2006
(2) Mileage Data is not covered by The HPI Guarantee
(3) The HPI Guarantee is subject to terms and conditions