Robert Forrester, CEO, discusses the impact of VED reform

21/02/2017 11:10 Share

There have always been lots of options and choices available when buying a new car. Colour, power, price, green credentials etc. but now there are also the changes to Vehicle Excise Duty to be considered.

There is significant confusion over the new Vehicle Excise Duty, or Road Tax,that comes into force on 1st April 2017. I think it’s a coincidence that the new regime begins on April Fool’s Day, but I’m not sure!

The Government clearly don’t understand or care about the importance of the March market and the distorting impact this might have on the industry and its customers.

First year rate, standard rate, emissions, list price what does it all mean for the motorist, and particular anyone thinking about buying a new car this year? One thing is for sure for new cars it will mean a significant rise in cost; it is important to point out that the changes do only affect new vehicles purchased from 1 April. There is no retrospective element.

Currently road tax is based on the CO2 emissions of the vehicle; the higher the emissions the higher the road tax. There is one rate for the first year of tax – the first year rate and another for the second and subsequent years – standard rate.

From 1st April the first year rate continues to be based on the vehicle’s emissions, although the bands and rates will change. The standard rate however, that is for the second and subsequent years, will be based more on the vehicle’s list price than emissions. Once again though it’s not straightforward. Vehicles with a list price of £40,000 or less will attract a rate of £140. Those with a list price of more than £40,000 have an additional rate of £310, making a total of £450, which will be due for five years, after the end of the first year. It will then revert back to £140, or the prevailing rate at the time.

Next question – what is the list price? It is the price of the car before the 'on-the-road' charges are added, such as a delivery charge, new vehicle registration fee, number plates and fuel. However, it is the final list price of your car which determines the £40,000 threshold – if you buy a cheaper model, but add options that take the price over that point, you'll still have to pay the higher fee. In short, an option costing a few hundred pounds could end up costing you more than £1500 over five years in extra car tax costs!

Even if you negotiate a discount with the very helpful sales executive that drops the price of the car back under £40,000, you'll have to pay the fee, because the listed price will still be more than £40,000.

Confused? It’s hardly surprising. As a business we have had to ensure that all our customer-facing colleagues understand the nuances and can communicate these to customers. In addition, customers want the very best advice on the most important question. Should I buy now, or wait until after April 1st? What are the financial implications? To make it simple we have done all the hard work and prepared a road tax calculator, which can be found across our websites. In about fifteen seconds a customer would discover that if they bought a Ford Ki+ 1.2 85 Zetec 5 door petrol hatchback before the 1st April they could save a not inconsiderable £720.

Food for thought. So whatever the whys and wherefores of the new road tax system for the savvy customer the advice would be – ask the experts at our dealership and you could be very surprised with the amount of money you save by bringing your new vehicle purchase forward.

We have developed a handy VED Calculator to help everyone understand how much money could be saved by purchasing a new car before 1st April – try it out today: CLICK HERE