Why do DVLA change more if you pay your Road Tax via DD?

DE_612183

Surely they should offer a discount like energy companies?

Or the Tv Licence - which just actually divides the whole fee by with 12 or 4.

Although the road tax is a fixed amount that is due on the day it starts - it covers the period in advance, so it's not like you gain an advantage by spreading the payment - all it means is that the DVLA don't gain interest on the money when you pay in advance.

 Anyone know if this has been challenged anywhere?

forgotmyname

As you said your paying in arrears and at a guess people that choose that option may forget to pay at times which costs
them money?

Thought the TV licence direct debit scheme had a £5 charge also? Checked and the Quarterly DD scheme seems to have the charge.

They do have the discount automatically applied unless paying by direct debit you don't get that discount. Another way of looking
at it.

Sandtree

The surcharge is for paying monthly/every 6 months not for DD itself, if you pay annually by DD there is no increase. 

Why should they offer a discount for giving you credit? Try going to you bank and ask if you can borrow £1,000 but only pay back £990 because you're willing to pay by DD

MX5huggy

Because as you noted they don’t get the money DVLA lose out if DD was the same cost as full payment. 

And it’s the same with TV licenses there’s a £5 (4 x £1.25) surcharge for quarterly payments. And if you swap to monthly for the first 6 months you pay for a whole license then you start paying for a license every 12 months so in effect they you’re always paying for a license 6 months in advance. 

Energy used to be sold quarterly in arrears not surprisingly they prefer people to pay monthly building up balances. 

Car_54

Among the reasons energy companies offer a discount for DD payments:
  1. It gives them a stable cash flow - better than sending a quarterly bill in arrears, which might be paid eventually.
  2. It locks some customers in - inertia takes over.
DVLA don't have to worry about customers leaving, so they can charge a premium to offset their added costs.

facade

I'd never noticed before, since there is no way I'd start a DD with them, but the 6 month DD price is cheaper than the 6 month cash price ( the 6 month DD is 50% of the total of the 12 monthly DDs).

I can't imagine anyone would go for a 6 monthly DD though, there is no saving over a monthly one.

The surcharge is probably "punishment" for not paying the whole fee 12 months in advance- or even simply "because they can".

Sandtree

facade said:

The surcharge is probably "punishment" for not paying the whole fee 12 months in advance- or even simply "because they can".

So do your credit card or bank "punish you" by charging interest when they lend you money?

Its not a punishment, its a charge for being given credit and not paying for the year in advance. As others have said its the opposite of energy companies where their bills are normally paid in arrears but DD means they start collecting in advance so improves their cashflow. DVLA goes from money in advance to on the drip which worsens cashflow and increases operational costs.

DE_612183

Sandtree said:

facade said:

The surcharge is probably "punishment" for not paying the whole fee 12 months in advance- or even simply "because they can".

So do your credit card or bank "punish you" by charging interest when they lend you money?

Its not a punishment, its a charge for being given credit and not paying for the year in advance. As others have said its the opposite of energy companies where their bills are normally paid in arrears but DD means they start collecting in advance so improves their cashflow. DVLA goes from money in advance to on the drip which worsens cashflow and increases operational costs.

I sort of get it - but I don't see is as being given "credit" as the services are not in arrears.

I guess the way to look at is that the DD charges are the correct values, and the discount is given if you pay in full up front.

It's just not advertised that way - which may be why I don't see it their way!

facade

Sandtree said:

So do your credit card or bank "punish you" by charging interest when they lend you money?

Absolutely they do.  They punish you even more severely if you miss a repayment or try and get them to lend you a few pounds without asking first!!

It isn't the same though. DVLA are punishing people for not doing what they want them to do - i.e. pay their VED 12 months in advance, not charging a fee for lending them money.

Car_54

DE_612183 said:

Sandtree said:

facade said:

The surcharge is probably "punishment" for not paying the whole fee 12 months in advance- or even simply "because they can".

So do your credit card or bank "punish you" by charging interest when they lend you money?

Its not a punishment, its a charge for being given credit and not paying for the year in advance. As others have said its the opposite of energy companies where their bills are normally paid in arrears but DD means they start collecting in advance so improves their cashflow. DVLA goes from money in advance to on the drip which worsens cashflow and increases operational costs.

I sort of get it - but I don't see is as being given "credit" as the services are not in arrears.

But you're not paying for a service, it's simply a tax. The tax is payable in full on day 1, so if you pay it later by instalments you're effectively getting credit.

BTW don't be fooled by the "5%" rate. The APR works out at over 40%.

DE_612183

[Deleted User] said:

DE_612183 said:

Sandtree said:

facade said:

The surcharge is probably "punishment" for not paying the whole fee 12 months in advance- or even simply "because they can".

So do your credit card or bank "punish you" by charging interest when they lend you money?

Its not a punishment, its a charge for being given credit and not paying for the year in advance. As others have said its the opposite of energy companies where their bills are normally paid in arrears but DD means they start collecting in advance so improves their cashflow. DVLA goes from money in advance to on the drip which worsens cashflow and increases operational costs.

I sort of get it - but I don't see is as being given "credit" as the services are not in arrears.

But you're not paying for a service, it's simply a tax. The tax is payable in full on day 1, so if you pay it later by instalments you're effectively getting credit.

BTW don't be fooled by the "5%" rate. The APR works out at over 40%.

The reason I called it a service was because if you stop using car after 3 months you get a rebate - so effectively if you pay at the start you are paying "up front". You don't pay all your income tax at the beginning of the year.