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      01-17-2019, 06:07 AM   #45
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Quote:
Originally Posted by AyrshireColin View Post
Yeah I perhaps framed it wrong. I know 100% how can you be £12k in negative equity.....you drive away from the garage and the VAT is away!

Goneinsixtyseconds you've nailed it - why would anyone consider trading with £12k negative is more what my thinking was. I struggle with the notion.
No. Your original statement is this. And it is categorically wrong. The VAT is not charged on as a second hand car, we all know that.

But your original statement said that was why cars end up in negative equity as the VAT comes off the value of the car as you drive away. That is rubbish, it makes zero difference.

The cost of a second hand car is all to do with supply and demand, nothing at all to do with VAT.

For example, if the law was that VAT WAS charged on a used car, same as a new car, a dealer would still only be able to charge the market price for it. Which would be directly related to the price of the equivalent new car, and supply and demand. Demand will be influenced by lots of other factors, including reliability, warranty, etc etc etc.

But, the price the dealer can sell it at is in no way influenced by VAT. He couldn't just add it to the price of the car, as it would be too close to the new price and no one would buy it. It would still cost the same to us, just the dealer would make less.

Same as your false statement on pre reg cars. They are just being sold at market value, nothing to do with VAT. The dealer has paid the VAT as a new car yes, but he doesn't just discount the used car by that amount and write it off as a loss.

Plus, a pre reg can, and often is, more expensive than a brand new car with the biggest broker discount you can find......that you're still paying VAT on.
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      01-17-2019, 06:17 AM   #46
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Quote:
Originally Posted by AyrshireColin View Post
Going by the statements - your own included - clearly everyone doesn't know how VAT works!

VAT is paid on a new car and that is a fact. AT!...
I believe you'll find quite a few of us do know how VAT works, and also know VAT is a component in used car values, but it isn't simply you lose 20% of value on the new car sale because of the VAT.

As has been said, 'supply and demand' has a big part in used prices, plus state of the market, etc. Typically a BMW will hold much more of a percentage value than a Ford, smaller cars than luxury cars, out of the door. I can remember when even with 20% VAT, trying to get a nearly new BMW (as a straight forward purchase) for less than 5% than a new car was near impossible, VAT was not wiped out on the initial purchase.
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      01-17-2019, 08:13 AM   #47
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Wow.... love how a thread by Zero has been derailed into an argument.... and for once it wasnt due to something he said!
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      01-17-2019, 09:19 AM   #48
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Wow.... love how a thread by Zero has been derailed into an argument.... and for once it wasnt due to something he said!
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      01-17-2019, 10:59 AM   #49
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Quote:
Originally Posted by Goneinsixtyseconds View Post
No. Your original statement is this. And it is categorically wrong. The VAT is not charged on as a second hand car, we all know that.
Err... yes it is. Either through the second-hand margin scheme or at 20%. It doesn't affect the price the buyer pays, as you're just paying market price.
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      01-17-2019, 11:54 AM   #50
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Perhaps it might be helpful to point out there are a few ways of buying a second hand car which can impact on VAT....

1) Trade
2) Private
3) Trade (after a period of private ownership)

As I do not believe it is possible to privately buy a car without someone paying VAT somewhere along the way I am in the "it doesn't dissappear camp." It is function of the market price albeit there is no VAT payable in the specific transaction where someone has already taken the hit.

I may be wrong, but that's my understanding :0)
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      01-17-2019, 12:28 PM   #51
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Quote:
Originally Posted by Ronstein View Post
Err... yes it is. Either through the second-hand margin scheme or at 20%. It doesn't affect the price the buyer pays, as you're just paying market price.
I thought we'd already established that most dealers use the second hand margin schemes, particularly the types of dealers we're discussing.

Ok, so saying none of the VAT is charged is over simplifying. Using that scheme the majority of the VAT is not charged, in comparison to a new car. Is that better? I'd be willing to bet that through creative accounting, particularly on pre reg cars, the dealers shows a lot of sales as not making a profit at all and therefore pays no VAT.
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      01-18-2019, 03:59 AM   #52
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Quote:
Originally Posted by Goneinsixtyseconds View Post
I thought we'd already established that most dealers use the second hand margin schemes, particularly the types of dealers we're discussing.

Ok, so saying none of the VAT is charged is over simplifying. Using that scheme the majority of the VAT is not charged, in comparison to a new car. Is that better? I'd be willing to bet that through creative accounting, particularly on pre reg cars, the dealers shows a lot of sales as not making a profit at all and therefore pays no VAT.
Certainly among the less reputable dealers, I would definitely agree (I was a Sales Manager in the motor trade many moons ago and worked for both ends of the 'reputable' spectrum!). Most dealers make nothing on pre-reg cars and will often lose money on them. They pre-register them to hit targets that then attract big bonus for the dealership but isn't associated with the cars. It's also not uncommon for manufacturers to give big 'tactical bonuses' on old stock or run-out models, hence my 6-month old £49k list, 2,700 mile 530d cost me £29k!!
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      01-18-2019, 11:55 AM   #53
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Quote:
Originally Posted by AyrshireColin View Post
Yes it is. VAT is neither anything to do with the 'cost' of a vehicle or it's value.

As with any new goods purchased in the UK (from a VAT registered retailer) VAT is paid by the first buyer and then it is gone. On used goods you're dealing with the VAT margin scheme.

What all this means is that a new car at £50k - 20%/£10k of this is VAT that is collected by the VAT registered retailer and subsequently paid to the tax man. So the reality that your £50k car is a £40k car that is why you have such front loaded 'depreciation' on a new car......reality is that it's not depreciation it's the VAT plus some depreciation.

This is also the reason why pre-reg/delivery miles cars are cheaper as you are the second owner of the car and as such you are not liable for VAT. Second hand cars fall under the VAT margin scheme where the VAT is payable against the profit that the seller is making. The £50k car has been purchased by the dealership and they are liable for the VAT - it can't be charged again.

You give the example of a Porsche GT. You are 100% correct that you 'could' make money but that is 100% nothing to do with VAT that is to do with you owning and selling goods in a sellers marketplace where the desirability/exclusivity/demand dictates the value, when said Porsche GT was first purchased as new the VAT was paid. Say you went and bought a nice shiny new 911 GT3 RS at £140k (??) then £28k of what you pay is VAT, after 6 months you look to sell it on and the original dealer takes it off you and is willing to give you back your £140k because they have a buyer lined up who is willing to hand them £155k for the specific car. The £15k profit that the dealer is 'making' would be liable for 20% VAT under the VAT margin scheme.

It's not any sort of myth it's all 100% fact. Every car - or any other goods - is liable to depreciation and appreciation and the market dictates that but the VAT element is 20% of the original purchase price on new goods.
That's an awful amount of typing to end up still being wrong.
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      01-21-2019, 03:26 PM   #54
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car rejected. 12k negative equity gone. Hes walked away from 3k deposit so 9k up.

Not a bad result.
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      01-21-2019, 03:35 PM   #55
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Quote:
Originally Posted by ZeroFx View Post
car rejected. 12k negative equity gone. He's walked away from 3k deposit so 9k up.

Not a bad result.
WOW!!

Q
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      01-21-2019, 04:25 PM   #56
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Man maths is brilliant.
The 12k neg equity it is in the cost of the new car. It doesn’t vanish.
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      01-21-2019, 05:02 PM   #57
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Quote:
Originally Posted by Alice Coupe View Post
Man maths is brilliant.
The 12k neg equity it is in the cost of the new car. It doesn’t vanish.
it did when the finance was cancelled.
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      01-21-2019, 05:14 PM   #58
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Quote:
Originally Posted by Alice Coupe View Post
Man maths is brilliant.
The 12k neg equity it is in the cost of the new car. It doesn’t vanish.
Only had a skim read of the thread but if I understand correctly the OP's father in law traded an X6 with £12k of negative equity against an A7 on which he put down a £3k deposit; having done so he's now rejected the A7 and is in a situation whereby he has no car (or indeed any equity, positive or negative!).

However, to get to that position he's "only" lost the £3k cash he put into the A7 whereas to hand back the X6 and walk away debt free would have cost him £12k cash to clear the negative equity. Therefore, to get to a clean slate to start again isn't he £9k up in cash terms as a result of buying and rejecting the A7 as opposed to just handing back the X6?

However, it's been a long and stressful day so apologies in advance if I've missed something obvious!
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      01-22-2019, 02:21 AM   #59
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Quote:
Originally Posted by JNW1 View Post
Only had a skim read of the thread but if I understand correctly the OP's father in law traded an X6 with £12k of negative equity against an A7 on which he put down a £3k deposit; having done so he's now rejected the A7 and is in a situation whereby he has no car (or indeed any equity, positive or negative!).

However, to get to that position he's "only" lost the £3k cash he put into the A7 whereas to hand back the X6 and walk away debt free would have cost him £12k cash to clear the negative equity. Therefore, to get to a clean slate to start again isn't he £9k up in cash terms as a result of buying and rejecting the A7 as opposed to just handing back the X6?

However, it's been a long and stressful day so apologies in advance if I've missed something obvious!
Yup get all that - now to buy the replacement car.
The 12K is based on what the dealers valuation is against outstanding finance. That valuation will be low. The X6, still has value and that has been off set by the new view vehicle.

I'd like to see all the figures as we don't have the full picture. It's written as if the OP has made £9k but I don't believe that's true.
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      01-22-2019, 02:32 AM   #60
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Quote:
Originally Posted by ZeroFx View Post
car rejected. 12k negative equity gone. Hes walked away from 3k deposit so 9k up.

Not a bad result.
That's mental that this is possible!

He's done well then.
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      01-22-2019, 02:48 AM   #61
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Originally Posted by JustChris View Post
That's mental that this is possible!

He's done well then.
I think the £12/9k is pseudo money. He has no car now and I think that's what is skewing things.
The cost of the x6 has been x per month (deposit plus monthly payments). Consider it rented. It's irrelevant what that car was worth to sell as he doesnt have any cash from it and no equity (vehicle).

He now doesn't have a new car - and also no cash.

So while it may appear he has made £9k, he hasn't because he currently has nada. All he's done is rent an X6 for a short while.
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      01-22-2019, 03:41 AM   #62
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It's not "gone" as such

If the A7 list price is £60k (example), and the total discount available was £15k, with no negative equity he could have financed £45k.

In reality, he's financed £57k, which is what is now cancelled
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      01-22-2019, 03:56 AM   #63
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Quote:
Originally Posted by DB118D View Post
It's not "gone" as such

If the A7 list price is £60k (example), and the total discount available was £15k, with no negative equity he could have financed £45k.

In reality, he's financed £57k, which is what is now cancelled
Exactly.
Not miraculously made £9k or "£9k up"

Last edited by Alice Coupe; 01-22-2019 at 04:37 AM..
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      01-22-2019, 04:12 AM   #64
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Personally i just look at it as though he hasn't gained £9k, he just hasn't lost £9k, which is what would have happened. As long as he is happy, that is all that matters, what we say doesn't matter a jot !
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      01-22-2019, 05:39 PM   #65
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Quote:
Originally Posted by Alice Coupe View Post
Exactly.
Not miraculously made £9k or "£9k up"
There was a 12k debt on the car versus its value. Choice was to trade in and transfer the debt to the A7 in the form of reduced discount or pay off the negative equity and get rid of the car either private sale or trade in.

The X6 sold at a profit for audi but not enough to cover the full 9k difference.

Either way he can now get a new car fresh with no baggage or debt to move to the new car.

Id say thats a win no matter how you look at it.
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      01-23-2019, 02:14 AM   #66
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Quote:
Originally Posted by ZeroFx View Post
There was a 12k debt on the car versus its value. Choice was to trade in and transfer the debt to the A7 in the form of reduced discount or pay off the negative equity and get rid of the car either private sale or trade in.

The X6 sold at a profit for audi but not enough to cover the full 9k difference.

Either way he can now get a new car fresh with no baggage or debt to move to the new car.

Id say thats a win no matter how you look at it.
The only difference now is he has no trade in. And no car.
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