Technically trade-in prices shouldn't be affected unless you delay the deal into December and it was due to take place this month. The dealer can adjust the trade-in value to counter another month's depreciation in the value of your car. However, the dealer should not knock off 2.5% as you are not providing him with a VAT invoice.
No, it shouldn't be as VAT is a tax on the manufacture of goods. The person who bought the car new has already paid the VAT.
That's why I said in a previous post that, technically, your trade-in price should not be affected as when you trade-in your car to get a cash value, you are not providing the dealer with a VAT invoice and/or a VAT receipt.
Furthermore, the VAT on new cars has ABSOLUTELY NO EFFECT on the dealer's profit margin - it's an amount that he pays (on your behalf) to the Treasury - the VAT reduction saves YOU money, that's all. So, any dealer that messes around by offering you less money for your trade-in is on dodgy ground.
If a new car is bought by a private individual, that person will pay VAT on the vehicle, this is included in the on the road price. When that vehicle is then sold 2nd hand, there is no VAT payable on it by the 2nd purchasher as the vehicles VAT has already been paid in full.
If however a new car is bought by someone who happens to own a business for example, that person can claim the VAT element of the purchase price (17.5% until next monday ) back through their VAT return. When this vehicle comes up for sale 2nd hand, this will then be advertised as "VAT Qualifying" - rare on cars, but commonplace on vans.
However, as Scrogg said, a cut in the VAT rate should in theory make the new car cheaper, which will in turn make 2nd hand cars cheaper. If a car cost £20k last week, and was worth £18k used, next week it should cost £19.5k new, so can't still be worth £18k used - iff you see my logic?
The 2.5% rate cut is minimal though, and the amount used cars are affected by will only be similar to 1 months depreciation for most cars.
Last edited by minicabrio; Nov 25th, 2008 at 12:25 PM.
If MINI Financial Services are paying MINI (2 completely different companies owned by BMW) the amount of the offer out of the interest they earn on the finance, then it won't be available to cash buyers.
Well, I requested a revised order form to reflect the new VAT rate and have gone through it in great detail and compared it line-by-line with the original order form which reflected the previous higher-rate VAT.
Whilst there is an overall saving, there have been some sneaky price adjustments on various things. Some options are marginally cheaper and some are more expensive.
My revised order form also showed that my discount was still calculated using the old VAT rate, meaning that the negative VAT amount was still the same as before andI ended up paying slightly higher VAT on the discount.
Other specific items that have changed are as follows (new VAT inclusive price - old VAT inclusive price):
MINI John Cooper Works - £19,959.75 - £20,445.00 (cheaper by £485.25)
Lea Punch Carbon Black - £551.75 - £550.00 (more expensive by £1.75)
CHILI Pack - £1655.25 - £1,650.00 (more expensive by £5.25)
Comfort Access - £357.50 - £360.00 (cheaper by £2.50)
Full Bluetooth with USB - £286.00 - £285.00 (more expensive by £1.00)
Exterior Mirror Pack - £168.50 - £170.00 (cheaper by £1.50)
Black Bonnet Stripes - £61.25 - £60.00 (more expensive by £1.25)
Chrome-Line Interior - £107.25 - £105.00 (more expensive by £2.25)
Visibility Pack - £219.75 - £220.00 (cheaper by £0.25)
First Aid Kit & Triangle - £46.00 - £45.00 (more expensive by £1.00)
Front Seat Heating - £204.25 - £205.00 (cheaper by £0.75)
TV Function - £715.25 - £715.00 (more expensive by £0.25)
Navigation System - £1,374.75 - £1,395.00 (cheaper by £0.25)
DAB Digital Radio - £286.00 - £285.00 (more expensive by £1.00)
HiFi Speaker System - £327.00 - £325.00 (more expensive by £2.00)
So, just on those options alone, excluding the cost of the base car, the dealer has increased the price by £10.50 DESPITE the VAT reduction!
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