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NFDA warns dealers of the greater cost of de-fleeting Pre-Reg and Demo carsBack

vedformAs you probably know, Vehicle Excise Duty (VED) is changing from April 2017. The way VED refunds are processed will not be changed, but the consequences of new higher first registration fees will have a negative effect on dealers.

VED refunds will continue to be based on the standard tax rate and not be extended to the first-year registration fees that dealers and customers pay. As the first year registration charge is much higher than standard VED rates, there is significant cost to dealers for vehicles that are de-fleeted or de-licensed such as demonstrators or pre-registered vehicles.

When the new Vehicle Excise Duty (VED) comes into force in April 2017, this cost will increase. In fact, some first registration rates will almost double, while the standard rate, on which the refund is based, will decrease.

One particular cause of losses from VED refunds can be early de-fleeting of demonstration cars. Many dealer agreements state that dealers can keep these cars on their demonstrator fleets for up to a year, however manufacturers often encourage dealers to change them more frequently as vehicles are given minor specification upgrades.  Dealers need to be aware of the full cost of de-fleeting vehicles and should discuss this with their manufacturers, if they are being asked to register additional demonstrators, to find a way to mitigate the cost.  Some manufacturers might offer additional incentives to cover the costs.  Alternatively, we would advise dealers to only pre-register low CO2 emissions cars when chasing targets as any vehicle with high CO2 emissions will cause dealers greater losses in case of early de-fleeting.

How is VED changing?

For new vehicles registered on or after 1 April 2017 with a list price of under £40,000, first year vehicle licence rates will be based on carbon dioxide (CO2) emissions of the vehicle. These rates will be changed on 1 April 2017 with revised CO2 ranges. For subsequent years, and also if the registered keeper changes, a flat Standard Rate (SR) of £140 will apply.

Zero-emissions vehicles, not including hybrid, will not incur either the first year or standard rate (unless the original list price of the vehicle exceeds £40,000). Hybrid and alternative fuel vehicles will receive a £10 reduction on the cost of their tax.

Vehicles over £40,000

For vehicles with a list price over £40,000 at first registration, there will be a supplement of £310 per year in addition to the standard £140 VED cost, a given total cost of £450. This will be in effect for the first five years of the car’s life.  After five years of the surcharged rate (£140+£310), the vehicle tax will revert back to the standard rate of £140 a year. The additional charge will also be applicable if the keeper is changed within the first five years.

The NFDA believe these changes to the VED have been introduced to address the issue of falling tax revenues from the current charges, as customers have reduced the tax they pay by buying lower and lower CO2 emissions vehicles over the past ten years. Hence the Government complete change of the CO2 bands, which will lead greater revenue generation.

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First licence rates for vehicles will continue to be based on CO2 emissions but please note, new rates are very different. For instance, the first registration rate which was free on a 130 CO2 car will cost £160 from April 2017, and cars with CO2 emissions over 255 will see an even greater increase of £880 for first registration.

 For further information or clarifications, please visit: https://www.gov.uk/vehicle-tax-rate-tables

Posted by Sue Robinson on 27/01/2017