Hello,

Can someone please help ?

Our new government in it's infinite wisdon has decided to increase VAT from 17.5% to 20%, apart from calculator sales reducing I'm trying to figure out how this will impact second hand prices - seems like a simple question, but I understand how it impacts new car prices...........but I plan to buy a "new" second hand car early next year. So, from my basic accountancy understanding I thought you pay VAT once on an asset. Therefore, does that mean if buying an ex-management or Demonstrator from a dealer then you don't pay VAT and hence no price rise ? Or do you pay VAT and therefore 2.5% prise rise from January 2010 ?

HELP - please ?

Therefore, does that mean if buying an ex-management or Demonstrator from a dealer then you don't pay VAT and hence no price rise ? Or do you pay VAT and therefore 2.5% prise rise from January 2010 ?

This website explains how dealers are supposed to handle VAT:

http://www.hmrc.gov.uk/vat/sectors/motors/selling-cars.htm

Think ex-demo would be classed as "new" as the dealer's purchase invoice would have VAT on it, so they'd calculate VAT on the full purchase price.

Either way, short answer is yes, if a dealer doesn't reduce their profit margin to compensate, you'll be paying more for your car next year.