Car Dealer figure fiddling !!

losgiganteskid

My neighbour has bought herself a second hand car and traded her own in as part ex.

Although a deal has been done, when the invoice arrived the garage have in effect reduced the forecourt price of the car by approx £500 and reduced the part exchanged traded in car by £500. The net effect is the same but why have they done that ? - also by accepting paperwork that shows the value of the car to be £500 less, what would happen in the event of a car write off with the insurer paying either the market loss at the time or the purchase price - whichever is the lower !

LandyAndy

I believe it reduces the trader's VAT liability.

thescouselander

This happened to me a few years ago. It wasn't some dodgy garage either, it was a Toyota main dealer!

CvPiper

They will be losing profit to A) Reduce VAT on profit To put her car into stock at what is is actually worth, not what they offered her against the purchase.

The figures make no difference - she paid a price to change, and also the invoice value is irrelevant on the insurance side, they will be insured for what they are worth at a given time of incident.

The only time it could appear to affect something is if she had RTi Gap Insurance.

thescouselander

CvPiper wrote: »

They will be losing profit to A) Reduce VAT on profit To put her car into stock at what is is actually worth, not what they offered her against the purchase.

The figures make no difference - she paid a price to change, and also the invoice value is irrelevant on the insurance side, they will be insured for what they are worth at a given time of incident.

The only time it could appear to affect something is if she had RTi Gap Insurance.

Thats all very well but surely by signing the invoice you have become an accomplice in a tax fraud.

candice56

Agree with CvPiper.

Its unlikely the PX offer was for the cars 'true' worth and so the garage have used some of their profit margin to inflate it at the time of doing the deal. The reality is that the profit margin/price on the car she bought was reduced by £500 bringing the retail price down and her car is worth the true value when it arrives in their stock.

Again in agreement this only makes any odds when the car was bought with RTI/GAP insurance as the cover gives you back the difference to your purchase price not the list price. Otherwise all is well and its a common practise as the cost to change is the focus for the dealer and the px value for the customer.

CvPiper

it does not constitute tax fraud, I am sure the dealer would like to have made the £500 profit, at the small expense of 15% of it, but it is imperative that the stock is at the correct value for the business to run correctly - this is the main reason, and whatever the final figures, they will be paying the tax that is required of them.

Lemonade_Pockets

As CV piper and others have said.

I used to be a business manager in a main dealer and we used to do this quite often for the reasons stated above, i.e. reduce VAT liability (this is more relevant if the dealer initially offered a deposit contribution and then discounted instead) and more importantly make sure the used car stock was bought in at the right price.

It is not VAT fraud. The dealership will pay the appriopiate amount of VAT to the tax man as per the final invoice.

N.b. We always explained to our customers exactly what we where doing to make sure they where happy with it. As others have stated it makes little difference to anything else unless you have purchased Return to Invoice GAP.

thescouselander

candice56 wrote: »

Agree with CvPiper.

Its unlikely the PX offer was for the cars 'true' worth and so the garage have used some of their profit margin to inflate it at the time of doing the deal.

But that is my point. If you dont document the true value of the deal and end up paying less tax as a result then that is fraud.

Its like if you were to sell your house just under the stamp duty threshold and then sell the "contents" at a vastly inflated price to make up the difference.

LandyAndy

I wasn't meaning to suggest that it was in any way fraudulent.

It is quite correct that they will wish to put the vehicle into stock at its 'true' value.

Of course they could do that by simply writing down the vehicles value but what they do is to ,quite legitmately, adjust the invoice figures. This has the benefit of reducing the VAT liability. All above board and a practice that has been common since the introduction of VAT.

thescouselander

LandyAndy wrote: »

I wasn't meaning to suggest that it was in any way fraudulent.

It is quite correct that they will wish to put the vehicle into stock at its 'true' value.

Of course they could do that by simply writing down the vehicles value but what they do is to ,quite legitmately, adjust the invoice figures. This has the benefit of reducing the VAT liability. All above board and a practice that has been common since the introduction of VAT.

But what is the point to this? Why not offer the "true" value for the trade-in and sell the car at its "true" value to begin with?

Wright or wrong, in may case I refused to sign because I will not put my signature to something I know to be false.