Swings and roundabouts for new car buyers when it comes to the VAT rise

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Buyers are worried that they will have to pay the extra 2.5 % VAT on their new car even though they ordered them this year while the rate is still at 17.5%.

The extended lead times currently being experienced with many car manufacturers is creating nervousness amongst customers and franchised dealers, who can certainly do without the negative feedback this could cause.

The extra VAT will cost buyers £250 on every £10,000 spent so it is a serious issue for many potential car buyers.

However some in the trade view the situation as an opportunity to give buyers a real choice. The fact is that if a new car registered between now and the end of the year will be what’s known as a 1060 (2010 “60” plate) whereas next year, from January the cars will be 1160 (2011 “60” plate) and therefore in the eyes of the trade worth a premium by being a registration year newer.

So although the customer may pay extra in VAT they may lose in terms of future value when the time comes to sell their car on.

For smaller cars for instance, which are around the £10,000 mark, the difference between a 1060 and an 1160 registered car would certainly be at least £250 therefore negating the extra money paid in VAT but the more expensive cars the difference can well be as much as £1,000.

So it is certainly worth checking before deciding.

Saving the VAT may very well not be as cost effective as the extra residual value the newer registration plate would create.