Will Coronavirus hit used car prices? (Vol 2)

[havoc]

Deep Thought said:

There was talk of it around November as per the link, not sure what they did in the final agreement.

Wide ranging implications IF it did go through - ALL used goods exported out of the UK by a trader of any sort subject to full UK VAT on the way out? That wont just apply to cars it'll be everything - clocks, watches, any sort of goods. I cant even see how that would be managed?

Have you got a link - not heard of that proposal.


As long as I've understood the current regs correctly, anyone SELLING goods outside GB (note GB not UK), as long as they can document the export, need not charge VAT. So the invoice will be raised 'net'.

Local VAT is then accounted for (& charged to the buyer) by the overseas importer (usually the shipping firm) alongside any duty payable* prior to goods being delivered to the buyer.

The same will apply to imports into GB. This is essentially how things have worked with e.g. USA, China and Japan for years. This applies to all NEW cars sold either direction.


For second hand cars, however, life is more complicated...
- IF the car is "VAT qualifying" (bought by a VAT reg'd business SOLELY for business use and VAT reclaimed at point of purchase, i.e. almost no 2nd hand cars) then there's benefit in exporting it, as otherwise the GB seller has to charge full 20% VAT on the sale, not just VAT on the margin scheme.
- For all other 2nd hand cars, VAT has already been dealt with at first sale, so tough luck...

So the BBC article is correct - anyone on the island of Ireland buying 2nd hand cars from GB will have to pay import VAT, while the GB seller won't get any benefit.


Edit: if THIS was the quote that was under debate...

prand said:

Interesting point this, my Irish colleagues are also complaining now about increased costs from purchasing through amazon.co.uk and uk ebay. So the relatively large potential market from UK small and large business is now likely to be hard hit.

...then i've seen something about a de-minimis sales price (£135 I think) below which the vendor has to account for the recipient country's VAT. Think that's inbound (UK legislation dumping the responsibility for small-item VAT accounting onto overseas sellers!), but there may be something reciprocal.

It's equally possible that the online websites/retailers are playing it safe until they can change their coding and are charging VAT where they (now, this week) don't actually need to.



* Duty/tariffs are what have been agreed at zero-rate as part of the Brexit deal.

Edited by havoc on Thursday 7th January 11:05

[nickfrog]

Court_S said:

Deep Thought said:

nickfrog said:

A couple of M2C in Feb at £37995 AUC.

Will be interesting to see what happens this year with them as a lot will be coming off 3 year PCP deals.

And hopefully that’ll have an impact on the OG’s. £28k feels strong money for a five year old AUC M2.

Depends on spec, colour, number of owners and crucially mileage and condition. It could be a very poor deal or a very good one. The main "issue" with the OG M2 is that there wasn't one before it to pull prices down so as you say you rely on the Comp to do that.

I had hoped for £25k M2s at the end of 2019 but that never happened unless you were happy with a wrapped moded high miler sold by AJS Quality Cars in Middlesbrough with a 10 second warranty.

Edited by nickfrog on Thursday 7th January 11:36

[Deep Thought]

havoc said:

Deep Thought said:

There was talk of it around November as per the link, not sure what they did in the final agreement.

Wide ranging implications IF it did go through - ALL used goods exported out of the UK by a trader of any sort subject to full UK VAT on the way out? That wont just apply to cars it'll be everything - clocks, watches, any sort of goods. I cant even see how that would be managed?

Have you got a link - not heard of that proposal.


As long as I've understood the current regs correctly, anyone SELLING goods outside GB (note GB not UK), as long as they can document the export, need not charge VAT. So the invoice will be raised 'net'.

Local VAT is then accounted for (& charged to the buyer) by the overseas importer (usually the shipping firm) alongside any duty payable* prior to goods being delivered to the buyer.

The same will apply to imports into GB. This is essentially how things have worked with e.g. USA, China and Japan for years. This applies to all NEW cars sold either direction.


For second hand cars, however, life is more complicated...
- IF the car is "VAT qualifying" (bought by a VAT reg'd business SOLELY for business use and VAT reclaimed at point of purchase, i.e. almost no 2nd hand cars) then there's benefit in exporting it, as otherwise the GB seller has to charge full 20% VAT on the sale, not just VAT on the margin scheme.
- For all other 2nd hand cars, VAT has already been dealt with at first sale, so tough luck...

So the BBC article is correct - anyone on the island of Ireland buying 2nd hand cars from GB will have to pay import VAT, while the GB seller won't get any benefit.

The link i was referring to was just that BBC article

That hasnt changed though has it? that was always the case. If someone dealer from Dublin bought a car from Manchester for £10K off some private individual, they couldnt claim back any VAT element. They could only do that on VAT qualifying cars.

So no change there then? They would pay VRT to register it in Ireland, as before.

The grey scenario is Northern Ireland, which seems to have some unique rules in play (as per the BBC article).

My other point was that the poster that i was quoting seemed to have confused / interspersed Northern Ireland with Ireland and then referenced the 150,000 cars exported to Ireland.

If nothing has changed for Ireland that wont be impacted.

I think the question mark is over what happens if a dealer in Northern Ireland is buying used stock on the mainland - the article from November implied there was a significant issue there, but i dont know if that was bottomed out for the final legislation

[Court_S]

nickfrog said:

Court_S said:

Deep Thought said:

nickfrog said:

A couple of M2C in Feb at £37995 AUC.

Will be interesting to see what happens this year with them as a lot will be coming off 3 year PCP deals.

And hopefully that’ll have an impact on the OG’s. £28k feels strong money for a five year old AUC M2.

Depends on spec, colour, number of owners and crucially mileage and condition. It could be a very poor deal or a very good one. The main "issue" with the OG M2 is that there wasn't one before it to pull prices down so as you say you rely on the Comp to do that.

I had hoped for £25k M2s at the end of 2019 but that never happened unless you were happy with a wrapped moded high miler sold by AJS Quality Cars in Middlesbrough with a 10 second warranty.

Edited by nickfrog on Thursday 7th January 11:36

Or something from Keighley....

I’ll only touch an AUC. I’ve decided that in reality I’ll be sticking with my car for this year at least. Hopefully prices will soften a bit in the next 12 months or so.

[havoc]

Deep Thought said:

The link i was referring to was just that BBC article

That hasnt changed though has it? that was always the case. I


...

I think the question mark is over what happens if a dealer in Northern Ireland is buying used stock on the mainland - the article from November implied there was a significant issue there, but i dont know if that was bottomed out for the final legislation

1) True.

2) There is an issue - NI, because of the land border with the EU and the strong cross-border ties in local communities, has been left 'hanging' between the two jurisdictions. I can see why they'd want it to be VAT-contemporate with Ireland, because otherwise it'd be a great way to play a form of tax arbitrage using the absence of a hard border.


PS - I edited my post above to refer to the original comment on the previous page which makes a little more sense (I hope).

[nickfrog]

Court_S said:

Or something from Keighley....

I’ll only touch an AUC. I’ve decided that in reality I’ll be sticking with my car for this year at least. Hopefully prices will soften a bit in the next 12 months or so.

They will. Wet finger in the air tells me £200/month for the next 12 months.

[Ipadslayer]

Glad I found this thread as I'm after an AUC OG M2 at the moment and have been having similar thoughts on how Covid will affect prices too. I missed out on an LCI yesterday very well specced low mileage manual went for £32995 and I offered £32k. I too think that is strong money for a 3 year old M2, but they are new cars still and as someone above said until the Competition cars filter in they won't sink below that quickly.

I am also thinking £200pcm for the next 12 months. I am after a rocking horse poo car though, only 2 LCI Manuals in the AUC stock and one just sold.

[nickfrog]

Ipadslayer said:

I am after a rocking horse poo car though, only 2 LCI Manuals in the AUC stock and one just sold.

Could you live with a pre-LCI car or is the difference in price too small?

https://usedcars.bmw.co.uk/vehicle/202010165089688...
https://usedcars.bmw.co.uk/vehicle/202012046771221...

Edited by nickfrog on Thursday 7th January 13:32

[Deep Thought]

havoc said:

Deep Thought said:

The link i was referring to was just that BBC article

That hasnt changed though has it? that was always the case. I


...

I think the question mark is over what happens if a dealer in Northern Ireland is buying used stock on the mainland - the article from November implied there was a significant issue there, but i dont know if that was bottomed out for the final legislation

1) True.

2) There is an issue - NI, because of the land border with the EU and the strong cross-border ties in local communities, has been left 'hanging' between the two jurisdictions. I can see why they'd want it to be VAT-contemporate with Ireland, because otherwise it'd be a great way to play a form of tax arbitrage using the absence of a hard border.


PS - I edited my post above to refer to the original comment on the previous page which makes a little more sense (I hope).

Agreed.

So the 150,000 cars applies to Ireland, not Northern Ireland. Any flow to Ireland can progress as previously.

Dealer sourced cars mainland -> Northern Ireland would be notable but not in the realms of 150K or anywhere near it.

[Gman20]

Deep Thought said:

Agreed.

So the 150,000 cars applies to Ireland, not Northern Ireland. Any flow to Ireland can progress as previously.

Dealer sourced cars mainland -> Northern Ireland would be notable but not in the realms of 150K or anywhere near it.

I don't think that's right.
I don't think the suggestion was the flow was from NI to republic, that would probably be more cars than they even register a year.
A car exported from GB mainland for sale in the republic of Ireland is now subject to full VAT, so basically that is going to stop happening.
It sounds like NI is also caught in the middle of this which I don't think particularly affects mainland GB but is really bad for car buyers in NI.

[Deep Thought]

Gman20 said:

I don't think that's right.
I don't think the suggestion was the flow was from NI to republic, that would probably be more cars than they even register a year.

No, i didnt say it was from NI to Republic.

Gman20 said:

A car exported from GB mainland for sale in the republic of Ireland is now subject to full VAT, so basically that is going to stop happening.
It sounds like NI is also caught in the middle of this which I don't think particularly affects mainland GB but is really bad for car buyers in NI.

So how does that work in the real world now?

Previously -

=> Dealer from Dublin went to say, Manchester, bought a used car @ £10K, brought it back, paid the VRT, sold it.

Is it really now -

=> Dealer from Dublin goes to Manchester, buys a used car @ £10K, now has to pay VAT on that @ £2K so £12K, then bring it back and pay VRT?

OR, in your experience were the only used cars going from UK mainland to Ireland those that were VAT Qualifying?

[volvos60s60]

All this talk about prices for, say M2s, being higher now than pre Covid. Let's also remember that these cars are nearly a year older now as well. This means, imo, that they are looking very overpriced

[Deep Thought]

volvos60s60 said:

All this talk about prices for, say M2s, being higher now than pre Covid. Let's also remember that these cars are nearly a year older now as well. This means, imo, that they are looking very overpriced

Yes, we were seeing 2016 M2s starting @ £25K in Jan 20. In a normal year, those would have been say £22-23K now.

Those same 2016 cars are £27K now, so approx £4-5K astray of what they should be now.

The risk is, is that the "new normal" or could we potentially see a drop when things start to normalise again? If the latter, someone could take quite a bath buying a 2016 M2 now @ say £27K only to find its worth say £19K trade price at the end of the year.

[volvos60s60]

Deep Thought,

My point and sentiments exactly

[Trevor555]

Deep Thought said:

volvos60s60 said:

All this talk about prices for, say M2s, being higher now than pre Covid. Let's also remember that these cars are nearly a year older now as well. This means, imo, that they are looking very overpriced

Yes, we were seeing 2016 M2s starting @ £25K in Jan 20. In a normal year, those would have been say £22-23K now.

Those same 2016 cars are £27K now, so approx £4-5K astray of what they should be now.

The risk is, is that the "new normal" or could we potentially see a drop when things start to normalise again? If the latter, someone could take quite a bath buying a 2016 M2 now @ say £27K only to find its worth say £19K trade price at the end of the year.

I was trying to source an MX-5 Recaro edition in 2019

Retail prices were around £12,995 average in 2019

They're now more like £14,995

[Deep Thought]

volvos60s60 said:

Deep Thought,

My point and sentiments exactly

Frankly its a show stopper for me - in terms of buying one.

I'm probably okay with say a £3K drop for a years ownership on what would be a second car for us, worst case. Not so comfortable with a potentially £7K drop.

Edited by Deep Thought on Thursday 7th January 15:29

[Gman20]

Deep Thought said:

So how does that work in the real world now?

Previously -

=> Dealer from Dublin went to say, Manchester, bought a used car @ £10K, brought it back, paid the VRT, sold it.

Is it really now -

=> Dealer from Dublin goes to Manchester, buys a used car @ £10K, now has to pay VAT on that @ £2K so £12K, then bring it back and pay VRT?

OR, in your experience were the only used cars going from UK mainland to Ireland those that were VAT Qualifying?

Yeah that is what it seems like to me.
There was a thread on sp&l about the legal implications of the Brexit deal where I suggested discussing it, what with this being a motoring forum, but they pretty much accused me of being a doorstep trader trying to get free tax advice.

[nickfrog]

Deep Thought said:

Yes, we were seeing 2016 M2s starting @ £25K in Jan 20.

As you know I was looking hard then already, and quickly ruled out the couple of non-cat £25k cars as they were either 50k miles or without a AUC warranty AND out of original warranty which makes it very expensive to re-Mondial them. In other words, they were poor value compared to their "equivalent" low mileage AUC cars at £29k then. I spoke to the "dealers" and those cars also had services missing, loads of owners, modded, dubious provenance etc...

In other words, M2s were never £25k, at least for my liking.

I thing the AUC prices are a much better indicator of value and I think even at current prices they are a bargain.

I predict £200/month depreciation and certainly not £7k / year (although I appreciate your £7k includes the trade's margin). But time will tell.

Edited by nickfrog on Thursday 7th January 17:09

[havoc]

nickfrog said:

I predict £200/month depreciation and certainly not £7k / year (although I appreciate your £7k includes the trade's margin). But time will tell.

Given the rule-of-thumb is 50% of value every 3 years, and reducing that a little for a branded performance car, a £29k car now would be worth maybe £16-18k in 3 years time (less if you p/ex), so you're talking +/-£4k a year, so half-way between the two estimates above.

[nickfrog]

havoc said:

nickfrog said:

I predict £200/month depreciation and certainly not £7k / year (although I appreciate your £7k includes the trade's margin). But time will tell.

Given the rule-of-thumb is 50% of value every 3 years, and reducing that a little for a branded performance car, a £29k car now would be worth maybe £16-18k in 3 years time (less if you p/ex), so you're talking +/-£4k a year, so half-way between the two estimates above.

Maybe but thankfully the 50% depreciation every 3 years thing has not proved itself to be true even for run of the mill cars for me so hopefully that will carry on! If not, £9k for a 9 year old M2 would be great, but that's far far less than a 9 year old E92 M3 currently (which is the nearest benchmark for performance and despite higher tax and lower mpg).

Edited by nickfrog on Thursday 7th January 19:01