An expert has warned that Chancellor Alistair Darling’s changes to the taxation system, announced in the Pre-Budget report, won’t help the fortunes of used car dealers that much.
Paul Brown, tax director for Trevor Jones, does acknowledge that the 13-month cut in VAT "will have a positive impact on the spending power of all but the least well-off".
But he cautioned: "It seems unlikely that the prospect of a cut of £425 in the price of a £20,000 new car, combined with the relatively minor impact of the personal tax changes announced, is enough to tempt hordes of buyers back into car showrooms."
Mr Brown is also concerned by the fact that the VAT change is only temporary, and feels that dealers might have to foot the cost of the Treasury losing VAT revenue by 2011 when there will be higher levels of income tax and national insurance contributions.
Martin Keighley, HPIs Used Car Valuations expert, shares Mr Jones’ worries.
He thinks that the future of the used car sector, and its profitability, will depend on how pronounced the looming recession becomes. Will it tip over into depression?
Mr Keighley said: "Unemployment will probably continue to rise, further reducing demand in the used market, and new car stocks are too high, hence supply will also continue to rise.
"These are the ingredients for a recipe of falling used car valuations and in turn, profits."
Written by James Christie