Pre registered cars - who pays the VAT

jonny_watson

Hello, I'm thinking of purchasing a pre-registered car from a Vauxhall dealer because the price is significantly lower than a brand new car.

I understand that it's a method by which the dealer can hit sales quotas with the supplier, and that they benefit from bulk discounts rather than by ordering cars 1 by 1 as customers come in. The dealer is the initial owner, I'm then then 2nd owner (if I go ahead). Etc etc

What I'm interested in is who pays the VAT. Does the dealer pay the full VAT price? And then I get charged VAT on the profit portion when they sell onto me?

Thanks

Geodark

jonny_watson wrote: »

Hello, I'm thinking of purchasing a pre-registered car from a Vauxhall dealer because the price is significantly lower than a brand new car.

I understand that it's a method by which the dealer can hit sales quotas with the supplier, and that they benefit from bulk discounts rather than by ordering cars 1 by 1 as customers come in. The dealer is the initial owner, I'm then then 2nd owner (if I go ahead). Etc etc

What I'm interested in is who pays the VAT. Does the dealer pay the full VAT price? And then I get charged VAT on the profit portion when they sell onto me?

Thanks

No, it's the same as anything VAT related - they buy the car in paying VAT on the cost price, you pay them the VAT on the selling price - then the balance goes to hmrc - unless I am missing something here?

motorguy

jonny_watson wrote: »

Hello, I'm thinking of purchasing a pre-registered car from a Vauxhall dealer because the price is significantly lower than a brand new car.

I understand that it's a method by which the dealer can hit sales quotas with the supplier, and that they benefit from bulk discounts rather than by ordering cars 1 by 1 as customers come in. The dealer is the initial owner, I'm then then 2nd owner (if I go ahead). Etc etc

What I'm interested in is who pays the VAT. Does the dealer pay the full VAT price? And then I get charged VAT on the profit portion when they sell onto me?

Thanks

They will have bought the cars from Vauxhall on the basis they're paid for NOW - it helps with the manufacturers cashflow, stock levels and gets more cars registered.

Any duty due on a new car will be paid by the dealer to the manufacturer, who will then be submitting a return to HMRC.

Yes, when you buy the car the dealer will pay a vat element based on the "vat margin scheme", ie, VAT from his profit margin.

AdrianC

jonny_watson wrote: »

What I'm interested in is who pays the VAT. Does the dealer pay the full VAT price?

A new car that's bought by a VAT reg business can claim the full VAT back. They then charge VAT on the sale. If a VAT reg business buys it, they can then reclaim etc etc. But ONLY until it's bought by a non-VAT reg business or an individual. After that, VAT can never be reclaimed on it.

Either way, as far as your question goes, it's irrelevant unless you're a VAT reg business. The price you pay is the price you pay. If the advertised price is +vat, then it should be clearly stated as such, so you should never get a 20% "surprise".

jonny_watson

Thanks for the swift and informative replies.

I suppose the question I'm really driving at is..

When a 'new' car is driven off the forecourt the new owner effectively loses 20% of the value of the vehicle. Whereas when a 'pre registered' car is driven off the forecourt then is its value:

the price paid - 20%
OR
the price paid - a much smaller % that represents VAT, i.e. VAT on the margin

From my interpretation of responses I believe AdrianC suggests the former whereas motorguy and Geodark suggest the latter?

AdrianC

jonny_watson wrote: »

I suppose the question I'm really driving at is..

When a 'new' car is driven off the forecourt the new owner effectively loses 20% of the value of the vehicle.

Not necessarily. Depending on the desirability and supply of the new car, a pre-reg delivery mileage car may actually command a premium over list.

Depreciation is nothing to do with VAT, and everything to do with supply and demand. Any resemblance between the VAT rate and a notional "20%" drop in value for a pre-reg is merely coincidence with a side-order of reverse-engineering...

Whereas when a 'pre registered' car is driven off the forecourt then is its value:

the price paid - 20%
OR
the price paid - a much smaller % that represents VAT, i.e. VAT on the margin

From my interpretation of responses I believe AdrianC suggests the former whereas motorguy and Geodark suggest the latter?

My suggestion, clarified... It's an irrelevance.
If you're VAT-reg, then you reclaim the VAT but charge VAT on the eventual sale.
If you're not VAT-reg, then it's just "some money".

uknick

AdrianC,

Just what I was going to say with regard to losing VAT as you drive off the forecourt. It's just a coincidental figure.

As far as I recall the depreciation curve for main stream cars has been pretty much the same over many years, even when VAT was a lot les then it is today at 8%.

Tilt

I worked for a main dealer once (no longer exists) which had a rental department. Cars which are registered for rental are not subject to VAT providing their use is at least 80% rental (unless the rules have changed) because the VAT is accumulated when the car is hired out.

BUT they sometimes sold a rental car 'new' to a customer before the rental department ever saw it...

You can work the rest out for yourselves. :think:

jonny_watson

Thanks all, particularly AdrianC.

That's useful to know that depreciation isn't related to VAT (I'm new to this forum and new to the world of cars btw..)

I see now that to focus on the VAT aspect is not relevant. Instead I should focus upon general depreciation of the vehicle.

The way I see it is that the pre-registered vehicle is heavily discounted when compared to the list price so the depreciation will be less than a brand new vehicle, although of course there will be an additional owner in the log. Shout if you disagree!

motorguy

jonny_watson wrote: »

The way I see it is that the pre-registered vehicle is heavily discounted when compared to the list price so the depreciation will be less than a brand new vehicle, although of course there will be an additional owner in the log. Shout if you disagree!

Just make sure that is IS heavily discounted.

Large dealerships tend to have new car sales teams and used car sales teams. Its not in the used car salesmans interest to tell you how much discount you can get on a new car.

Check the likes of https://www.broadspeed.com to see what you can get off a new one.

Also, vauxhall are offering 0% finance on a lot of their range, this may not be avail on a pre-reg.

Also, check that the 'lifetime warranty' applies if its pre-reg.

AdrianC

jonny_watson wrote: »

The way I see it is that the pre-registered vehicle is heavily discounted when compared to the list price so the depreciation will be less than a brand new vehicle, although of course there will be an additional owner in the log. Shout if you disagree!

Nope, you're bob-on.

As motorguy suggests, some warranties are "first owner" only, so may not apply. In addition, you don't get to play with the options and spec sheet if you buy a pre-reg.

If you're planning on keeping the car for a year, then the fact it's two keepers rather than one might make a difference to value, but if you're keeping it for five years, it's almost certain to be no difference.