Fleet News

CAP warns of increases in VED

This year trade buying got off to a slow start, but by mid January things were back into full swing. Most auctions were reporting good business with reasonable conversion rates at the majority of sites, although there are of course exceptions and the word 'patchy' has been used by some in the trade.

Stability does seem to be returning after a strange few months but it is becoming even more apparent that the higher mileage cars are really struggling now. The mileage considered difficult is now reducing further. It was above 100,000 not too long ago, then it was down to 90,000 and now the public are very wary of putting their money into anything above 75,000 miles. This is a growing problem and a worrying one for those with many of these vehicles to dispose of.

The new company car tax system is now just a few weeks away and is understood by most. Some will be hurting in the pocket, while others will benefit. As we have all had our Inland Revenue tax coding notices for the next year, some, like me, will be counting the cost. But who would have known about this a couple of years ago? When company cars were being chosen from a list little thought could be given to what a difference it could make two years away. When legislation changes it normally happens fairly fast and can catch a lot of people out. The first natural reaction for those hit in the pocket is to think about how to get out of the current car and into something cheaper on the tax bill. But most companies will not allow early terminations and drivers with the extra tax burden will simply have to live with it and get on with life. Other companies are being more generous and helping the driver out of the problem, by paying the early redemption fee and allowing the driver use a car with a lower emissions. A problem could arise if a sudden influx of larger, less efficient cars of a less than desirable nature hit the market at the same time. It only takes a few extra to upset the balance.

Something else to think about is a possible change in Vehicle Excise Duty, or the tax disk charge. In the rest of Europe the difference in duty between a small engine car and a large one is substantial, while here in the UK there is only £70 between the lowest and highest charge for twelve months. But looking over the water to Southern Ireland the difference is hundreds of pounds. If the Government does change the VED system then large-engined used cars will be even more difficult to sell. And a scale of charges is nothing new in the UK. Back in 1910 it was based on horsepower and the variations ranged from £10 to over £40. There has been much talk about increasing VED for some time. It is now only a matter of time and the vehicles costing more will undoubtedly be less desirable than they are now, as the used car customer is more frugal than the new car buyer.

Auctions are still reporting high conversion rates as the trade move into top gear and start retailing more cars to the public. They are being helped by kind weather, low interest rates and generally lower priced cars, compared to last year. Most types of car are selling. However there are some late low mileage ones that are around in abudance and where manufacturers are offering them to their dealers on a sale or return basis, these seem to be the ones gradually being stockpiled. When dealers have an SOR deal they are unlikely to go out and spend their own cash on stock. The disposers at rental companies are finding homes for most of their vehicles, but they are up against dealers who are taking advantage of sale or return. Most report that the Ford Focus is in demand, especially Zetec. Dealers are still finding that demand for sports cars is on the increase as Spring is only a few weeks away. The public has learned over the past few years that if they want open top motoring they have to be in the market early to get what they want.

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