Tawse you're quite right - all the sticker prices I've seen for nearly new CR-Vs do look well over the top in the current climate, especially for a 4x4.
I'm certainly won't pay anything like sticker price if I do go down this route.
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basically just the VAT dropped off the price of a new one so the dealers aren't losing a >> penny as far as I can make out.
Where does this thing about losing the VAT on a new car come from? The dealers pay very little VAT - only on the profit they make.
VAT is an integral part of the price, it's not something you can knock off and just lose.
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VAT is an integral part of the price it's not something you can knock off and just lose.
If a brand new car costs, let us say, 23K in a dealer that price includes 3K of VAT meaning that car is 20K and the VAT is 3K.
If this car is used as a demo car by the dealership for 1,000 miles and they then sell it on the forecourt the VAT is immediately stripped off the original price as the VAT is only payable on new vehicles and not on secondhand cars which, effectively, what this car now is.
(The same applies to pre-reg cars with just 10 miles on the clock - if they are pre-reg it means they have a name on the log-book already and are effectively secondhand.)
Now, going back to our first example, the dealer pays the 3K in VAT and then sells the car on their forecourt for 20K the car has not lost them a penny because if you had bought that car brand spanking new for 23K you would have been the one paying the 3K VAT and not the dealership. The car, after all, is only worth 20K and the 3K is simply tax on a new vehicle which the HMRC pockets.
So it is galling - nay a ruddy cheek - to see ex demo cars on forecourts for what is effectively the price of a new car simply minus the VAT. Sometimes you will see cars for slightly more than less the VAT - i.e. in our example they would pay the 3K in VAT and then flog this now secondhand car on the forecourt for 21K and have the nerve to think that they are doing you a service.
They basically exploit th general Public's lack of knowledge of VAT and of taxation issues generally. After all, most people cannot balance a cheque-book nor understand the APR rate on loans, mortgages and savings.
I am seeing numerous new model CRVs on forecourts which are basically 1 year old, have anything up to 15K miles on the clock and the dealers have the ruddy nerve to market them at the original price minus the VAT. If you or I had bought that same CRV, drove it ten feet off the forecourt and then reversed it back on to the forecourt asking them to buy it back not only would they deduct the VAT from any buy-back price but also, no doubt, a few K more.
I read a post over on a Toyota forum last month from a chap who bought a Toyota RAV4 for about 20K, he used it for about 3 or 4 months and then tried to sell it back to the dealer. I think they offered around 12K even though, if you go to any Toyota dealer, I doubt you will find a 3 or 4 month old RAV4 for 15K let alone 12K.
IMPO, Hondas are looking decidely expensive now compared to other brands and their much-vaunted CRV, in the current economic and 'green' climate, is looking decidely expensive. That's just my PO.
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I really can't understand your point on VAT Tawse. There's a myth that "you lose the VAT as soon as you drive a new car away", as if that's inevitable and a mathematical relationship - it isn't. What if the VAT rate was 100%? Would a £20,000 car be worth only £10,000 as soon as you had bought it? Of course not.
VAT is part of the price of a new car. The dealer pays it on a demonstrator (albeit on the wholesale price) and cannot recover it. There is no VAT on a second hand car so if the dealer is to avoid a loss he must sell it for what he paid - the inc. VAT price.
It's nothing to do with exploiting the public's ignorance, though I have heard dealers promulgate this VAT myth as well when buying a car in.
I have also observed the screen prices on second hand CR-Vs, and agree they are unrealistic - not sure what's going on, but we don't have to buy them.
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i.e. in our example they would pay the 3K in VAT and then flog this now secondhand car on the forecourt for 21K and have the nerve to think that they are doing you a service.
I'm completely baffled by your argument - how is the dealer better off if they'd paid out £3K in VAT?
I think what you're saying is that dealer can reclaim the VAT on demo and pre-reg cars? If you know that to be true and are a motor dealer management finance guru, then I bow to your knowledge.
However I would be astonished if that were true - for it means HMRC are losing the whole VAT amount on a new car - I really can't for the life of me imagine that that is correct. They just cheerfully waive £3K - no way.
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I'm completely baffled by your argument - how is the dealer better off if they'd paid out £3K in VAT?
I am not saying they are better off. I am merely paying out that the VAT has been paid.
I think what you're saying is that dealer can reclaim the VAT on demo and pre-reg cars? If you know that to be true and are a motor dealer management finance guru then I bow to your knowledge.
No, I am not saying that the can reclaim the VAT on demo and pre-reg cars but, again, merely pointing out that they pay it. However, with all VAT registered businesses they will pay and recoup VAT accordingly.
However I would be astonished if that were true - for it means HMRC are losing the whole VAT amount on a new car - I really can't for the life of me imagine that that is correct. They just cheerfully waive £3K - no way.
I don't know where you get that idea from - certainly not from what I have written in my above post as I am pointing out that the VAT has been paid when new and as soon as any car is no longer new - this includes ex-demos sold on to Joe Public and pre-reg cars sold to Joe Public - it is secondhand and hence no VAT is payable on it.
If you buy a secondhand car from a private owner via an ad in the paper do you pay VAT? No, of course not. Does the chap selling you his beloved car pay VAT? No, of course not. The car is secondhand and, again, VAT is not payable on secondhand cars and, whether you believe it or not, an ex-demo or a pre-reg car sold by a dealer is basically a secondhand car.
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It might well be possible for a dealer to recover input VAT in certain circumstances, but if he did he would have to account for output VAT on the sale. What I am certain he cannot do is recover the input VAT, then sell the car on without accounting for VAT within the total selling price.
Leasing companies can recover input VAT, but must of course add VAT to the rentals.
HMRC did not come up in the last bucket.
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When I sold new Renaults in the 1980s we always discounted the new car against a part-ex because the customer saved the vat on the discount.
A simplified example:
Basic price of car £5,000 plus vat at 10 per cent = £5,500, less £2,000 part-ex, customer pays £3,500.
Now, knock £500 off new car and part-ex value, leaving the dealer in the same position.
Basic price of car £5,000, minus £500 discount = £4,500 plus vat at 10 per cent = £4,950, less £1,500 part-ex, customer pays £3,450.
The £50 difference is the vat on the discount.
Obviously the bigger the numbers and the higher the vat rate, the greater the 'saving'.
Edited by ifithelps on 23/09/2008 at 19:49
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>>Timescales always seem to slip<<
tawse - remind us please when Honda have failed to deliver on time-scale commitments previously please - I am interested as this is the first I've heard of them delivering late.
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>>Timescales always seem to slip<< tawse - remind us please when Honda have failed to deliver on time-scale commitments previously please - I am interested as this is the first I've heard of them delivering late.
Well, rang a dealer back in July asking when the new Jazz would be in the showroom and was told early September. Was then told, in August, second week of October and about a fortnight back was told the 28th of October now.
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That's interesting as I too have been following the new Jazz and have always been told October. Every web site I have read also said October (I think Car magazine said autumn).
I can see why you say what you say now but I think the salesman was wrong rather than Honda being late. Having said that he is Honda's representative to the outside world and he got it wrong.
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www.hondauk-media.co.uk
tawse - try the web site above if you require further clarification on any model releases.
I checked for the Jazz again for you and all releases suggest October - so as I say I think the rep got it wrong.
I hope it helps.
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The other common 'scam' was to add all the profit on a used car into the included insured warranty, reducing the car price accordingly, and eradicating all VAT liability on second hand car sales (there is no VAT on insurance premiums).
C&E got rather fed up with having no VAT whatsoever from second hand car profits, and clamped down on this "value shifting". The final nail in the coffin was the introduction of insurance premium tax at the same rate as VAT which made the fiddle pointless.
I believe they still drop both prices on new car transactions though - but whether the customer always gets the benefit is debatable.
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tawse, your original point was:"the prices are just ludicrously high - basically just the VAT dropped off the price of a new one so the dealers aren't losing a penny as far as I can make out."
...but the dealer has paid the VAT in the first place (when he registers the car) so they can't just "drop the VAT off". It doesn't disappear - it still has to be paid.
So (ignoring profit margins, bonus etc) if the car price is £20K plus £3K VAT then it's cost the dealer £23K to register it.
The only way they can sell for £20K is either because the car was discounted by the manufacturer up front, or, more common, there's a rebate available when it's sold. So the dealer might get £4K (plus VAT of course) back from the manufacturer and he therefore is able to make a profit on the deal.
The "value" of the VAT stays in the car for its whole life. Privately sold secondhand cars don't attract VAT (although dealers pay VAT on the profit they make on the car) in just the same way as if you bought a flat screen TV for £750 and then sold it to someone for £650 - you wouldn't reset the value to its exVAT price of £638 and then discount from there.
Edited by Bill Payer on 23/09/2008 at 21:06
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BP is correct. You only have to consider what would happen to second hand prices if VAT on new cars went up to say 100%, to expose the myth of disappearing VAT. I don't think they would stay static...
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BP is correct. You only have to consider what would happen to second hand prices if VAT on new cars went up to say 100% to expose the myth of disappearing VAT. I don't think they would stay static...
Thanks - I don't usually become concerned about threads, but I was beginning to think I was going mad. :)
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Tawse - I have to agree with you here. I have no time for main dealers although I suppose we have to recognise that they have premises to rent/buy/maintain and wages to pay. We don't have to use them. You havn't mentioned balloon finance schemes (Ford's 'options' and the like) I feel that these really prey on people's ignorance of finances. Countless thousands of people conned by apparently low monthly payments, having paid a deposit and then not owning the car at the end. They know this, of course, but do they realise that the dealer sells the car at full price, punter pays an OTT interest figure, and either hands it back at the minimum guaranteed future value or finds more money to pay for it outright. If it's over agreed mileage or ill maintained penalties apply. Dealers cannot lose whatever happens - sell it on at a profit if returned and even if it's paid for they've sold at top price plus taken interest. Incredible that people sign up. I'm sure that if this were a financial product within the financisl services arena the regulatory FSA would have something to say.
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Dealers cannot lose whatever happens - sell it on at a profit if returned ..
So what about the 4x4's that are coming back now that are practically worthless?
I do agree that there's an element of conning people with PCPs - I know people who pay a deposit and think they're going to get it back at the end of the deal - but if you get the right deal, and your circumstances suit it, then some aren't bad. A lot of people do want that peace of mind of having the car covered by warranty and needing minimal servicing. So it costs them £150/£200/mth or whatever - there's no danger of a £1000 repair bill and a load of hassle that you could get with an older car.
The people who make money out of these deals are the manufacturer finance arms - they buy the cars at huge discounts. dealers love PCPs because at 3yrs the customer has to do something - either keep the car, hand it back or change it for a new one. The key point is that can't just drift on without doing anything - they have to take some sort of action and the dealer has the chance to get them into another PCP and carry on the cycle.
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The Accord i-DTEC is being shown at Paris with the auto box with sales to follow soon.
I would not be surprised to see this set up in the CRV soon.
The i-DTEC will no doubt be a great seller - expecially with an auto as it has all the usual Honda attributes of bullet proof reliability, durability and refinement.
I suppose the stuff you are describing above tawse is market forces.
They will either sell them at that price or go out of business.
As one of the most successful engineering company's in the world that makes anything from lawn mowers to private jets and engines then I guess they are confident enough with their prices. Like you though I wish they were cheaper as I could change mine more frequently then as they make very desirable cars.
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