Car tax has changed a number of times over the past few years which could’ve seen the fee certain motorists are paying for their vehicle excise duty (VED) fluctuate.
You’d be forgiven if you were confused about what the actual rate of car tax you will have to pay is.
Previously, car tax rates were fixed meaning in the first year you’d pay the same as the second and so on if inflation or other factors didn’t adjust it.
In 2017 new car tax rules were introduced which meant that motorists paid a higher first-year rate and then a standardised rate for subsequent years.
There were three new standardised fees for second and subsequent year VED rates introduced.
A flat standard rate of £140 applies to all cars except those with CO2 emissions of zero for which the standard rate is £0.
However, there is an additional luxury car surcharge of £310 for vehicles that cost over £40,000.
This fee is to be paid by drivers for the first five years of ownership.
It adds an extra £1,550 on to the cost of ownership over five years.
This car tax fee is not only hurting driver’s pockets but it is also impacting car dealers.
Manheim’s customer insight and strategy director, Philip Nothard, said: “£310 may sound like an inconsequential sum in comparison to the outright cost of a premium used vehicle but it’s apparently enough to be a barrier for some buyers.
“The impact of this is used dealers are having to review how they price and pitch 12-18-month-old vehicles that cost over £40k when new, regardless of their value now.”
“The issue is coming to the fore as 17 and 67 plate stock is now reaching the used market in significant volumes and it’s likely being amplified by the rising number of buyers opting to fund their used vehicle with a PCP contract,” said Nothard.
“Monthly payments see many buyers stretch themselves to get into a vehicle they once thought unaffordable without factoring in any additional associated costs – and when they suddenly realise they need to find another £310 a year in tax alone, it can be too much to bear.
“With premium brands now accounting for more than a quarter of all new vehicle registrations in the UK, the number of vehicles falling into this VED category is set to increase, and as PCP takes a hold in the used sector, it represents a good growth opportunity for dealers.
“This sentiment suggests they just need to factor VED into their sales conversations to avoid any unwanted surprises.”