The dealer claims back the VAT he paid to the importer to buy the car into stock. That gives him a base price to work from. He then charges the customer VAT on whatever price he sell the car to the customer and it will be shown on the invoice. He then pays that VAT to HMRC. For example, dealer buys the car from International Motors for £15,000 + 20% = £18,000. He can then claim that £3,000 VAT back from HMRC in his next return. If he sells the car for you for £16,495, that's £13,746 + £2,749 VAT and he has to pay that £2,749 to HMRC in his next return.