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VED rates to affect used car values

VED rates are likely to become as influential on consumer used car choice as fuel economy and insurance costs.

That’s the view of experts at CAP as the company announces publication of CO2 figures and related car tax bands in the industry benchmark Black Book guide to current used car values. The May edition will therefore see Black Book become the first trade values guide in the UK market to incorporate this information.

CAP’s decision to publish CO2 figures and tax band details was prompted by the potential impact on many used car values caused by proposed vehicle excise duty rates to be introduced next year.

CAP believes consumer awareness of the mounting cost of VED will lead to many older cars losing value more rapidly as buyers take into account the cost of taxing the vehicle. And the threat is not limited to large engine vehicles. Even some relatively modest 1.6 engine cars will be significantly affected.

Experts at CAP are urging used car professionals to now begin taking account of CO2 figures when acquiring trade stock, to avoid the risk of more rapidly depreciating or even unwanted vehicles on the forecourt.

Mark Norman, Operational Development Manager, argues that cars emitting above 180 grammes of CO2 per kilometre will be hardest hit, with the annual cost of a tax disc representing half or more of the car’s trade value in some cases.

For example, a 2001 Y-registered Fiat Marea 150 20V ELX saloon is today valued in the trade at around £650. If next year’s proposed VED rates are introduced, the Marea will cost £415 to tax for 12 months. If a consumer pays the estimated £1,225 retail value of the car and intends to keep it for three years, it’s taxation cost over time will be more than they paid for the car originally.

Mark Norman said: “We have now introduced CO2 figures into Black Book because we believe that VED rates will become as influential on consumer choice as fuel economy and insurance costs.

“Traders and dealers should get into the habit now of taking into account the likely VED bands of cars they acquire because the new rules will apply to all cars registered from March 2001. Depending on the speed of growing consumer awareness, this means that there is already an increased risk that many older, low-value cars will become less desirable to customers.

“This risk will increase dramatically when the new VED rates are introduced in 2009. It is therefore important to begin routinely including tax bands in the trade valuation process today to become fully prepared for the new market conditions for older cars next year.