Skoda VAT Free Deal Query

ahillsy

pgilc1 wrote: »

It is the dealer who pays the VAT - it'll be their name on the invoice and its physically them who pays the VAT.

What I mean is that as it's not actually VAT-free, it's "a discount equivalent to the VAT amount"....the "VAT-free" discount is part-funded by Skoda, part funded by the dealership themselves (I can't remember the exact split). So, when VAT goes up, the amount of the discount has to increase to be equivalent to paying no VAT. It's this increase in the discount that I believe is covered by Skoda, not the dealer.

motorguy

ahillsy wrote: »

What I mean is that as it's not actually VAT-free, it's "a discount equivalent to the VAT amount"....the "VAT-free" discount is part-funded by Skoda, part funded by the dealership themselves (I can't remember the exact split). So, when VAT goes up, the amount of the discount has to increase to be equivalent to paying no VAT. It's this increase in the discount that I believe is covered by Skoda, not the dealer.

Ok, well look at it this way -

Back in september the O/P agreed to buy a Skoda for an agreed amount. Skoda UK agreed to give an discount equivalent to the VAT rate at that time which was 15%. That was signed, sealed and settled by the O/P, the dealer and Skoda UK

Roll that forward until when the car is due to be delivered. The VAT rate changes, and the discount agreed by Skoda back in September no longer covers it. The deal, in car sales terms, was agreed in a previous quarter and probably was based on a specific amount. Skoda UK say 'well we're still giving you the discount we agreed to' and the dealer says 'well we're going to have to pay 17.5% VAT so we'll bill the customer as the HMRC instructs us to do'.

ie, the discount was equivalent to the VAT rate at that time

motorguy

ahillsy wrote: »

What I mean is that as it's not actually VAT-free, it's "a discount equivalent to the VAT amount"....the "VAT-free" discount is part-funded by Skoda, part funded by the dealership themselves (I can't remember the exact split). So, when VAT goes up, the amount of the discount has to increase to be equivalent to paying no VAT. It's this increase in the discount that I believe is covered by Skoda, not the dealer.

I cant see Skoda UK voluntarily putting its hand in its pocket for all those extra 2.5%'s. They certainly arent obliged to. They may well chose to, but thats a different scenario.

david39

Everyone knew that the VAT reduction was for one year only, ending in December this year.

When the deal was struck with the OP in September, the dealer knew that and should have included the extra 2.5% in his costings.

motorguy

david39 wrote: »

Everyone knew that the VAT reduction was for one year only, ending in December this year.

When the deal was struck with the OP in September, the dealer knew that and should have included the extra 2.5% in his costings.

From the o/p's original post, it does sound like the car was expected by now, ie, there was no expectation that it might be impacted by the rate change (plus there was rumour at that time it was to be extended)

Ultimately the VAT is chargable by the dealer, so if the dealer has 20 cars affected by this, it could easily amount to £10,000. Likewise if skoda has 2000 cars affected by this across the UK, then they could be out £1,000,000 to sort it out. So theres going to be a very obvious inclination to push that out to the customer.

It sounds like the dealer is going for the 'either you pay the extra 2.5% or we'll assume you want to cancel the order' approach.

ahillsy

I don't see why they wouldn't. All I know is that the discount is part-funded by Skoda (hence the dealers still have some room for negotiation after the VAT deal). Can't remember the split, but more funded by Skoda than the dealership. And that I've only paid a deposit for my order in November, and will not incur any increase in price for my March delivery as confirmed by my dealer.

There was a lot of confusion a while back surrounding what happens in the New Year with regard to the change in VAT. Including the dealers not knowing the full story. But I believe that has all been clarified now by Skoda UK.

motorguy

ahillsy wrote: »

I don't see why they wouldn't. All I know is that the discount is part-funded by Skoda (hence the dealers still have some room for negotiation after the VAT deal). Can't remember the split, but more funded by Skoda than the dealership. And that I've only paid a deposit for my order in November, and will not incur any increase in price for my March delivery as confirmed by my dealer.

There was a lot of confusion a while back surrounding what happens in the New Year with regard to the change in VAT. Including the dealers not knowing the full story. But I believe that has all been clarified now by Skoda UK.

Yes its definitely worth pushing.

Don't forget your car would have been ordered with the VAT change in mind, so the dealer probably built that 2.5% into their price to you. The problem here is that the deal was agreed in sept for what may originally have been a oct / nov delivery. 2.5% may not ound like much but nett profit on a new mainstream car is relatively small.