Fleet News

Price cuts could cost fleets dear in revenue claw-back

NEW car price cuts could save fleets, company car drivers and private buyers nothing as the Government will claw back the 'lost' billion of pounds in revenue by increasing other taxes, it was claimed this week. As the Competition Commission continues its long-running investigation into the UK motor industry and consumer organisations campaign for massive cuts in new car prices, industry leaders continue to warn of the widespread impact of such a move, particularly on residual values.

Amid much soundbite campaigning, CAP Motor Research this week counteracted the Consumer Association's 'Great British Rip-Off' claims by calculating that cheaper new cars in Britain could actually cost operators more cash. As a result CAP said: 'The impact of big reductions in new car prices could well be against the interests of the motorist.' Based on a 17.5% reduction in list prices with 7% being passed on to the customer in transaction price, CAP calculates that the Treasury would immediately lose £300 million a year in company car tax which is based on a car's list price. The theoretical 7% reduction in actual transaction price would result in a £3 billion reduction in VAT receipts over three years.

Mark Norman, editor of CAP Monitor - Future Residual Values, said: 'The idea that list price cuts would be a simple panacea for the consumer is a dangerous oversimplification of the true picture. Consumer groups want list prices reduced when it is clear that, in many cases already, the actual transaction price bears little relation to list price.' The Association of Car Fleet Operators has already told both the Government and the Commission that the majority of fleet operators buy their vehicles at discounts ranging between 5% and 11% with discounts of 30-35% considered 'exceptional' even for large fleets.

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