The new VED (Vehicle Excise Duty) car tax changes came into place on the 1st April 2017. These changes mean that buying a brand new car is now more expensive than ever.
What are the new car tax changes?
Any car registered with the DVLA after the 1st April 2017 will have different tax calculations. For the first year of tax, the rate will be on CO2 emissions. For electric cars, this is £0 but for the highest polluting cars, this can be as high as £2,000.
In the following years the vehicle is taxed at the same rate at either:
- £140 for petrol or diesel engines
- £0 for electric engines
- £130 for alternative engines (such as hybrids, bioethanol and LPG)
Cars with a list price of more than £40,000 will also need to pay an additional £310 a year for 5 years from the second tax year onwards.
What this means for the used car market
While the recently introduced tax laws may have rocked the new car market, second-hand cars registered before April 1st, 2017 are now more desirable than ever. As a result, 57% of people in a recent survey claim that they would be more inclined to buy a second-hand vehicle to avoid these charges (AM Online).
Cars registered in the months before April 2017 are likely to be worth more than a newer vehicle registered after the new tax deadline. But owning any car registered before this date will allow you to avoid the hefty tax charges.
For more information on tax changes see the Gov.uk website.
Other benefits to buying a second-hand car
As well as tax benefits, there are also other reasons to choose a used car over a brand new one:
Lower purchase prices
The main benefit to buying a used car is that the value is considerably lower than a new vehicle, making the cost to buy the car much more affordable. This is also the case when taking the car out on finance as your monthly payments will be lower.
Buying a second-hand car has always been a more cost effective option, as brand new vehicles depreciate in value so quickly. The average new car will lose up to 40% of its value in its first year (The AA).
Additional costs not as essential
As a car gets older it’s likely to depreciate a lot less over time, reducing the need for extra costs such as GAP insurance. This is an optional insurance paid out in the event that your car is written off or stolen, which covers the difference between the total value of the car and what your insurer will pay out.