Fleet News

Customs men want an end to 'bumping'

##CAPsml--left####Martin Ward--right##IN the motor industry the word 'bumping' means different things to different people. For as long as I can remember the trade has been adjusting figures on new and used car invoices, a process once called 'VAT tricking' but now known as 'bumping'.

These adjustments enabled two things to happen. One, dealers could over-allow on the part-exchange to cover any outstanding finance, giving the customer enough equity to buy another car. This often created problems for both the customer and finance company towards the back end of the new finance term.

The second point is where VAT gets involved. When an over allowance is given for a swapper, which is more common than is realised, the new car price is reduced on the official invoice. This cuts the VAT payable, entailing a loss of income to Customs and Excise. When multiplied throughout the industry, this represents a huge amount of lost VAT. However, now new car prices have fallen and VAT income has dropped accordingly, invoices are being examined and investigations carried out to prevent further loss of income through 'bumping'. The advice being given to dealers by accountants is to avoid the VAT trap and keep invoices accurate.

The counter argument surely must be that anything can be sold for any price, but Customs and Excise doesn't seem to see it that way, and full VAT must be paid on new vehicles when a part-exchange is involved. If the trade do start playing the game, some finance companies must breathe a sigh of relief.

Whipping up bogus crash claims

The other meaning of the word 'bumping' creeping into the industry's vocabulary is deliberately braking sharply and hoping somebody will bump into the back. A dangerous thing to do, but some feel that the potential financial gains are worth the risk.

This, according to those in the know, is particularly prevalent in Northern Ireland. Nobody knows why, but a substantial number of personal injury claims for whiplash and related injuries have been made there. There must be a message here to fleet managers to warn their drivers to be aware, and for disposers to expect more accident repaired vehicles coming off the fleet in future.

Focus proves the doubters wrong

The Ford Focus has been on the UK's roads for three years in October. It doesn't seem that long, but it has been a great success, both new and as a used vehicle. Any Focus at any mileage is sought after and just about everyone that has driven one likes it, whether they are a lover of the blue oval or not.

So what happens when the first three-year-old models start to be de-fleeted? Many dealers are already anticipating this as a real profit opportunity. They expect strong demand from used car buyers for this different, but reliable and value for money car. Fleet managers were also unsure back in October 1998 and thought Ford had gone mad in creating such an outrageous vehicle.

However, they must now feel assured that demand will continue for three-year-old models, as it has for ex-rental and two-year-old examples.

Ford also managed to create controversy when the Sierra was launched, which was christened the jelly mould; but sometimes a manufacturer has to be brave, and sometimes it pays off.

Insurance woes hit bike sales

The two wheel market is going through a difficult time according to our Green Book editor Rob Hobson. New bike sales are slightly ahead of last year's, but margins are being squeezed. Excess stocks being carried over mean that many first quarter sales were of 2000 rather than 2001 models. So now, enhanced dealer incentives have been introduced in an effort to increase sales.

The used market has been strong all year though, with sports middleweights the most sought after stock. This is partly due to problems obtaining insurance over.

Underwriters' costs have rocketed on the back of personal injury claims, and this has seen premiums balloon and customers being refused cover on a wider range of bikes. The big superbikes have suffered most and unless a customer has a totally unblemished record and has it alarmed and Datatagged, they cannot get cover at any price.

Also, while the bubble may not have burst for the scooter market, sales are certainly harder fought for. This is due partly to the increased number of outlets, but insurance and finance issues are also having an effect.

FNN allows you to search for REAL prices reached by REAL vehicles sold at the country's leading car auctions. To start your search click here.

Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Login to comment

Comments

No comments have been made yet.

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee