Depreciation and a half!?!

[DangerMouse]

I just visited my local Skoda dealership (Withams) to get an idea of what they'd offer me part-exchange for my car if I decide to go for the Fabia vRS.

My car is a 54 reg New Octavia Classi 1.6MPI with graphite grey metalic, air-con and leather pack. Less than 5k on the clock, and around 7 months old.

I was told the part-ex value would be around £7725. I paid 12k.


Is it only me or is that a REALLY bad depreciation? I mean, I expect to lose a reasonable amount... But not *that* much!

[robmawer]

When you bought the car, you will have paid VAT - so the exc. VAT price you paid would've been about £10k. The dealer will want to make about £1k on selling your car on, so knock that down to £9k - so actual derpreciation will be about £1.5k. Which I don't think is too bad for a 7 month old car really...


Rob.

[WW_VRS]

I'm expecting to have a car that's worth about 5k in 3 years from purchasing it.

If it's more than that, then great.

I've always gone for the 'must be able to write it off in 3 years' route - and the Furby is the first new car I've ever owned....

[DangerMouse]

Originally Posted by robmawer

When you bought the car, you will have paid VAT - so the exc. VAT price you paid would've been about £10k. The dealer will want to make about £1k on selling your car on, so knock that down to £9k - so actual derpreciation will be about £1.5k. Which I don't think is too bad for a 7 month old car really...


Rob.

Damnit. When you say it like that it sounds almost reasonable.

I still want more money for it though

[agent006]

Sell it privately if you want decent money for it. There are very few cars that don't depreciate hugely in teh first year (BMW X5 3.0d being a notable exception), hence why i'd never buy new with my own money.

[alock]

Originally Posted by robmawer

When you bought the car, you will have paid VAT - so the exc. VAT price you paid would've been about £10k. The dealer will want to make about £1k on selling your car on, so knock that down to £9k - so actual derpreciation will be about £1.5k. Which I don't think is too bad for a 7 month old car really...

Rob.

Before reading this, please note that I am not a VAT expert. This is my basic understanding of how VAT works and it might be completely wrong

I don't get this argument. If this is the case, the 1st registered keeper pays the whole 17.5% VAT and the car will never be worth more than 82.5% of its original purchase price. Even if it is only one day old.
The idea of VAT is to pay 17.5% on the value of your product. If I buy a car at £12K and sell it for £10K, the tax man should get VAT on the £2K value I took out of the car during my ownership.

When the garage sold you the car at £12K they will have paid £2100 of VAT to the tax man. When they buy it back off you for £10K, they can claim back £1750 tax, hence the tax man has his net £350 (17.5% of £2K depreciation). This cycle repeats through out the cars life until the car is worth zero and the tax man has his total £2100 to keep. Each owner paying VAT on the depreciation from their ownership.

[agent006]

But that only applies to trade sales. Private sellers aren't VAT registered so don't pay it.

[robmawer]

Originally Posted by alock

When they buy it back off you for £10K, they can claim back £1750 tax

Most (if not all) private individuals are not VAT registered though. Therefore, (for simplicity assuming the dealer is buying the car for cash) when a dealer is buying back your car they will not be able to claim the VAT, as they won't have paid any...

Pretty sure you don't end up paying VAT on secondhand cars anyway, just new ones...


Rob.

[WW_VRS]

Must admit it's why I never bothered with a new car - new(ish now) job requires me to have a car for the job. I can choose car allowance, or alternatively company car. Problem with company car is that you still have to put insurance on top, and that's company-wide with virtually zero NCB levels compared to my own. Very expensive.

Ended up buying the Furby as it's a solid car, perhaps a little plain inside but it's been excellent so far.

I could have bought one that had been run-in a bit, but Mrs & I wanted some toys on the car which is what we ended up doing.

New cars are terrible for keeping their value. Cars are generally not an investment from a getting money out of it perspective, they are there coz you need a reliable a-2-b tool at the very least, and then you can take it from there

(meaning: have some fun in it, mpg and/or performance, I dunno )

[roo]

Originally Posted by robmawer

don't end up paying VAT on secondhand cars anyway, just new ones...


Rob.

Thats true, you only pay VAT on new cars, otherwise they would be having a field day with Auto trader and the likes.


Also remeber the car is a classic and is less desirable than the Ambiente and Elegance so wouls be worth less as a percentage anyway.

[lozgti]

It has always been the case that as soon as you drive the car out of the showroom (with very few exceptions) you take a big hit on depreciation.Best to keep it for a couple of years.

As to the price offered by the garage,you probably won't do much better selling privately.Skoda normally do a proper p/x price which isn't bad or unrealistic.Maybe just check the classifieds to see what is the going rate for private.

Finally, I presume it is not a new shape octy.Sorry if I am wrong.If it is,the new one probably has hit the prices of the old ones

[DangerMouse]

Originally Posted by lozgti

It has always been the case that as soon as you drive the
Finally, I presume it is not a new shape octy.Sorry if I am wrong.If it is,the new one probably has hit the prices of the old ones

It;s a mk 2 Octy.. a "New Octavia"

I was goign to do a search for the current prices, but i cant find any of the same model on the classified websites at all so far!

[WW_VRS]

My intention is to keep it for 3 years at least - ideally wanna have finished paying it off before selling it or part-xchanging it

[alock]

Originally Posted by roo

Thats true, you only pay VAT on new cars, otherwise they would be having a field day with Auto trader and the likes.

I think (I might be wrong) this is wrong. As an individual, I don't have to worry about VAT during a transaction, so an Autotrader sale between two individuals doesn't involve VAT. If you sell to a VAT registered company though, the company can claim the VAT back. If the company then sells it on, they pay the VAT on the sale. Therefore the total VAT paid to Mr Brown is on the profit made by the garage. This is why it is called Value Added Tax because it is a tax based on the value added by the company.

But the underlying point is that VAT shouldn't matter (whether I am right or wrong above) for trade in price. Even if second hand cars don't have VAT, the VAT that was paid on the car several years earlier shouldn't effect the price of the trade-in/second hand sale. If I take my trade in to a garage other than the one I bought it from, will they give me more because they didn't pay VAT several years earlier on the car? I don't think so. This new transaction is completely seperate for the garage and all they have to do is decide whether they can sell it for more than they pay.

[redbaron]

you are wrong.

vat is only paid once on an item.

[Dazza]

I do lots of miles. In Jan 2005 I took my 01/09/2003 (16 months old) Octy 1.9TDI Amb with 60K on the clock to my local dealer. DM Keith in Leeds. After having to go back 3 times to catch the "guy who does the prices" was there, he offered my £5025 trade in against a new 01/03/2005 Fabia vRS.

Went around other dealers and was offered around £7000 - £8000, Obviously went for the 8K which was at the dealer I prefer and have always used. Bickerton's in Sheffield.

Both dealers had 4month old Fabia vRS' on the forecourt at £11995 - that's only about £400 off new

[WW_VRS]

Depends a little - mine was a shade below 14k with the options I had fitted, whereas an ex-demo was 10k

[alock]

Originally Posted by ffelan

you are wrong.

vat is only paid once on an item.

(the below assumes every company is in the UK for simplicity)

No, VAT is paid on the Value Added by each company.

If you think I'm wrong, please state exactly why, VAT is paid/reclaimed on every transaction. For more info, click below...
About VAT
quote: "This means that whenever you buy or sell anything in the course of your business, you will have to pay VAT to HM Revenue & Customs."

I would suggest that a garage not doing this either has a low turnover or is not putting the sale through the books.

[DGW]

No VAT is payable on secondhand cars bought privately. Used cars purchased from a dealer are subject to VAT on the profit margin only.

[Carblack]

Denis is right. I used to work for a car dealership and vat on second hand cars was charged on the profit margin only. That's why they were very reluctant to issue vat receipts for second hand car sales....!