VAT hike: don't get stung

New car buyers are being urged to haggle over extra VAT charges if they have to wait until after January 4 to have their car delivered. 

The new 20% rate comes into effect in the New Year, but even if customers agree to buy now at the 17.5% rate they may have to shell out more in tax when the car arrives. 

An investigation by Parker's revealed that most manufacturers have a waiting list for their cars. That means buyers who order the car now will still face the extra tax burden. Dealers cannot pay for the car now because they need a chassis number so inevitably, they will try to pass the extra cost on to the consumer.

Hannah Hollis, 24, a key account director, put an order in for a new Audi A3. She says: 'I wanted a new Audi A3 1.6TDi SE but was told the earliest I would get the keys to it was May 2011. I was shocked especially as I know I could get a VW Golf hatchback or a Seat Leon by mid-November 2010.'

So just how much difference can 2.5% make? On a £20,000 car the outstanding tax payable will be £500 and for a £40,000 car buyer will have to shell out an extra £1,000. 

But the Society of Motor Manufacturers and Traders says potential buyers should not only be aware of the extra cost, but also try to get the dealers to absorb the extra tax during their negotiations in the showroom. 

An SMMT spokesman told Parker's: 'Customers purchasing a vehicle before the VAT increase will be charged at the current rate of 17.5%, providing the vehicle is delivered and registered before the deadline. 

'If the vehicle's delivery is delayed until January, the VAT increase will then need to be charged. It will then become a matter of negotiations between the dealer and customer as to how the extra is paid.' 

Parker's investigation revealed long delivery times for scores of cars that will put them in the 20% VAT bracket. However, some manufacturers with long waiting lists have vowed to absorb the extra tax.

Skoda's Yeti is currently subject to a 30-week waiting list and the Fabia Estate up to 18 weeks. A company spokesperson told Parker's: 'We have a policy across our dealerships that the customer will pay the price agreed at the time of order, so the VAT increase will not affect our customers.'

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