VAT rising to 20 percent was a much-anticipated Budget announcement, so there was no surprise when it was announced last Tuesday.

Oh no, was the first reaction: that’s a hefty chunk on the price of new cars, not to mention the price list reprint and other logistics dramas.

But, here’s another thought. Could it actually work in the car industry’s favour?

Now scrappage has finished, some dealers are reporting new car sales have dipped again. What’s needed, they say, is another incentive, to get people into car showrooms again.

VAT rising provides just that! People will be buying this year, rather than holding on, in order to beat the increase next January.

OK, the savings aren’t initially on scrappage’s scale – the average family hatch buyer will save up to £500 by buying in December rather than January – but they’re still worthwhile.

Besides, car dealers will still have all the regular incentives on top of this ‘saving’, too.

The big question is, can dealers deliver in time? Premium makers, it is said, are going to get one of the more notable rushes: but we know waiting lists are already heady.

Will posh dealers such as Audi retailers be able to source enough cars quickly enough to meet this unexpected new sales opportunity?

Then there’s the questions over ‘invoice date’ and ‘transaction date’: will ordering a car in December at the old VAT rate secure it for customers, or will they have to pay 20 percent on the balance come delivery?

Many questions, without even touching upon what happens AFTER the VAT goes up. But, for now, let’s not look a gift horse in the mouth.

For the rest of the year, bargain-hunting buyers will be giving dealers an unexpected new car boost, that will help ease the post-scrappage downturn.

How are you planning to capitalise on it?

Richard.

Tags: list price, prices, trend, VAT

This entry was last updated on Monday, June 28th, 2010 at 4:40 pm and is filed under Blog.