Position regarding sales tax when buying a used car?

[Pan Pan]

When buying used car off the forecourt, is it accepted that the window sticker price includes sales tax, and therefore that the `actual' price of the vehicle is much lower?
Any advice would be appreciated.

[LuS1fer]

Not sure I understand. The window price is the sale price, including any VAT but there may be additions like vehicle excise licence ("road tax").

[VeeDub Geezer]

Isn't VAT only added if it was charged to the seller when they bought it?

[Dr Interceptor]

There is no VAT on second hand cars, unless it is advertised as 'VAT Qualifying'.

1. Dealer buys car (trade in) from Joe Bloggs for £5000. Joe Bloggs has owned the car from new, he paid VAT on the car when bought new, there is no VAT on this transaction.

2. Dealer puts the car on the forecourt for £6200, and you buy it at that price. You are not charged VAT.

3. Once the dealer is done, dealer retreats to his back office, deducts 5000 from the 6200 you paid, and is left with £1200 profit. This is declared on his VAT return, and so gives away the VATable element to the HMRC, which in this case will be £200 (£1000+VAT = £1200).

[Dr Interceptor]

Just to add to the above, what makes it worse for the dealer is that the costs of getting the car to the forecourt are not factored in.

So in the case above, if the car is bought for £5000, needs alloy wheel repairs (£100), Smart Repairs (£200), a service and MOT (£200) and a warranty (£200), the car has actually cost him £5700. However VAT is still paid on the profitable difference, so if you buy at £6200, that was £200. So all in, the dealer has parted with £5900, and gets to keep his £300 profit.

• Figures are not accurate, and are just used as an example.

[northwest monkey]

Dr Interceptor said:

Just to add to the above, what makes it worse for the dealer is that the costs of getting the car to the forecourt are not factored in.

So in the case above, if the car is bought for £5000, needs alloy wheel repairs (£100), Smart Repairs (£200), a service and MOT (£200) and a warranty (£200), the car has actually cost him £5700. However VAT is still paid on the profitable difference, so if you buy at £6200, that was £200. So all in, the dealer has parted with £5900, and gets to keep his £300 profit.

• Figures are not accurate, and are just used as an example.

Blimey, that's a bit harsh. How come it's like that?

[Ean218]

Dr Interceptor said:

So in the case above, if the car is bought for £5000, needs alloy wheel repairs (£100), Smart Repairs (£200), a service and MOT (£200) and a warranty (£200), the car has actually cost him £5700. However VAT is still paid on the profitable difference, so if you buy at £6200, that was £200. So all in, the dealer has parted with £5900, and gets to keep his £300 profit.

• Figures are not accurate, and are just used as an example.

But doesn't he get to claim back VAT of £16.66 on the wheels, £33.33 on the paint and the VAT on the service?

[McWigglebum4th]

northwest monkey said:

Blimey, that's a bit harsh. How come it's like that?

As he is notworking for the government and must be punished

[Dr Interceptor]

Ean218 said:

Dr Interceptor said:

So in the case above, if the car is bought for £5000, needs alloy wheel repairs (£100), Smart Repairs (£200), a service and MOT (£200) and a warranty (£200), the car has actually cost him £5700. However VAT is still paid on the profitable difference, so if you buy at £6200, that was £200. So all in, the dealer has parted with £5900, and gets to keep his £300 profit.

• Figures are not accurate, and are just used as an example.

But doesn't he get to claim back VAT of £16.66 on the wheels, £33.33 on the paint and the VAT on the service?

Yes, obviously, he's VAT registered, so he claims back the VAT on anything purchased. I was basing the prices above on NET figures, £100 + VAT for alloy repairs isn't unreasonable at say £20-30 a corner.

[singlecoil]

Dr Interceptor said:

Ean218 said:

Dr Interceptor said:

So in the case above, if the car is bought for £5000, needs alloy wheel repairs (£100), Smart Repairs (£200), a service and MOT (£200) and a warranty (£200), the car has actually cost him £5700. However VAT is still paid on the profitable difference, so if you buy at £6200, that was £200. So all in, the dealer has parted with £5900, and gets to keep his £300 profit.

• Figures are not accurate, and are just used as an example.

But doesn't he get to claim back VAT of £16.66 on the wheels, £33.33 on the paint and the VAT on the service?

Yes, obviously, he's VAT registered, so he claims back the VAT on anything purchased. I was basing the prices above on NET figures, £100 + VAT for alloy repairs isn't unreasonable at say £20-30 a corner.

Sounds like he needed to buy it for less, or sell it for more.

[oldnbold]

singlecoil said:

Sounds like he needed to buy it for less, or sell it for more.

Perhaps people should be directed to this thread when the next "dealer insulted me with PX price" thread appears.

[Roo]

The terminology used in the OP would lead you to believe he was in the US but his profile says otherwise.

[markmullen]

Roo said:

The terminology used in the OP would lead you to believe he was in the US but his profile says otherwise.

Exactly my thoughts.