VRT Tax

Recently I have had many people ask me about the effects this VRT change will have on the price of car. I'm actually getting people in looking for tax advice in relation to VRT!! I'm beginning to get lost in this question and at this stage I think it may be almost as complexed as the question of life!! I've even given a few trainees the task of reporting back with their opinion of the effects.

Fat lot of good that was!! "Ehh I can buy this car for €4,500 cheaper etc...." Oh the advice tax trainees give!!

This thread is not to find out examples of cheaper cars! Although I will mention a few examples!!!

What will the effects of the VRT change be?
Will cars become cheaper/more expensive?

In short I don't believe there will be a drastic change. I think there will be little or no change in the prices of cars. If you look at the wider picture and imagine the effect it would have on used car owners (everyone per July 08!!!). The amount of artificial deprecation would be detrimental to Irish car owners. If I own a March 2008 car and the VRT rate drops from 25% to 16% (Mini Cooper) then in effect Mr. Cowen has just knocked a load of value of my car! Who is going to buy a car that's more expensive than the exact same new car??

Then of course there's the flip side, if I drive a car that's going to go up in price will the value of my car go up? Could my year old car be worth more than when I bought it?!!!

Even from a CGT point of view, is a car that increases in value in 2 months a wasting chattel??


Then you have to look at it from the Revenue's point of view. The change in VRT is going to be a completely self defeating tax. Where is Revenue going to re-coup the vast amounts of money that people seem to think they're going to safe on VRT and maybe also road tax? Petrol? VAT? PAYE? I realistically don't know. Does anyone?

Unfortunately I don't have all day to type this but I'd be most grateful if people would give there opinion on this matter. Not exmaples of cars not the outcome of the change from a taxation point of view.

Regards!!!

First off, it will be impossible to generalise.. but in some specific instances the price will absolutely have to drop.

Take the BMW 520d.

BWM have promised to pass on the full savings of VRT (with a provisio that they may make some items that were previously extras, available as standard specification but with the value of them fully traceable back to the VRT saving).

So, on standard 520d there is a saving of 9500. Also, it will now be taxed at 150 instead of 590.

So, a 08 reg 2nd hand car being sold on the first of July, will not only have to compete with a new car being available for 9.5K cheaper, but also will have a 440 eur a year extra tax cost for it's lifetime.


Therefore it is a given that this model will have a serious adjustment in it's residual values. Given the euro-sterling rates, it becomes a no-brainer to bring in a 520d from the UK (even at today's rate it's cost effective - not to mind when the vrt drops from 30 to 16 per cent) so this will have a very large impact on this particular model.



The opposite also applies of course - some vehicles - e.g. the Land Rover Freelander, go from 530 a year in tax to 2000 a year, with the VRT going from 25% to 36%. So - residuals on the existing Land Rover pre July will remain strong.

So the short answer - no generalisation possible - down to model by model.

I honestly believe there will be a change to this before too long - probably something like people with cars pre- July 1st will be given the option of using the new annual tax structure.