Busting the VAT myth. (1 Viewer)

[Francis Watson]

I don't normally do forums but feel compelled to correct the misinterpretation regarding VAT on used motorhomes, where people claim that as soon as a van leaves the showroom it drops by 20% because of VAT. And it wouldn't be 20% anyway as VAT is only 16.66% of the RETAIL price! You might as well claim that you should lose the manufacturer's profit as well because that should only be charged once!

These are the facts: The original VAT is totally irrelevant when setting a price for a used motorhome. If a dealer has sold a MH for £50K but after a week the buyer decides that he doesn't want it and returns it, the dealer may give him say £44K as he knows that he can move it on quickly for £47K. Anyone who was happy to pay £50K for a motorhome would also be happy to buy it for £3K less knowing that it had never been used and had the full warranty minus just a few days.

I once bought a new car and sold it for more than I paid! It was a high end model that had a long waiting list and people where prepared to pay over the retail price. Again the original VAT charged was irrelevant.

So to sum up - when pricing a used van, the original maker's profit, the VAT and anything else are irrelevant to the used price. A product's used price is just a percentage of the new price and whether it's a house with no VAT originally charged, or a car or motorhome, the secondhand price is what a buyer would consider reasonable for its age and condition. A £100K van can be sold for £90K if it's as new and only a few weeks old.

The dealer's only VAT obligation on a used van is on his profit, so if he buys a van for £40K and adds £10K profit making it £50K he then adds 20% VAT on the £5K profit (£1K) making a total selling price of £51K.

So please, stop regurgitating this myth that a van must immediately lose the original VAT charge as soon as it leaves the showroom. It is untrue. I hope this helps.

 

[bigtwin]

Glad you’ve got that off your chest!

Ian

 

[Chris]

Thanks for putting us straight.

You can go back and lie down in a darkened room now

 

[Wissel]

Well that's one way of saying hello

Welcome to the forum.

 

[Francis Watson]

Apologies for my error in the dealer's VAT on a used van. I originally decided to add £5k profit but changed it to £10K but still had the VAT on £5K on my mind. The VAT charge on the £10K profit should of course be £2K making a final price of £52K.

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[Abacist]

The dealer's only VAT obligation on a used van is on his profit, so if he buys a van for £40K and adds £10K profit making it £50K he then adds 20% VAT on the £5K profit (£1K) making a total selling price of £51K.

The profit margin in your example is £10k not £5k so the VAT is £2k if he sells it for £52k or £1,666.67 if he sells it for £50k!

The seller of anything recently bought should always expect to lose quite a lot of money

 

[Francis Watson]

Glad you’ve got that off your chest!

Ian

So am I. One object of my post was to tell others that they need not accept any nonsense from a dodgy dealer that they must lose the VAT plus the other depreciation. I thought that this would be useful knowledge for others to have.

 

[Chris]

Apologies for my error in the dealer's VAT on a used van. I originally decided to add £5k profit but changed it to £10K but still had the VAT on £5K on my mind. The VAT charge on the £10K profit should of course be £2K making a final price of £52K.

I was going to point that out, but I wasn’t sure your blood pressure could take it

 

[Francis Watson]

The profit margin in your example is £10k not £5k so the VAT is £2k if he sells it for £52k or £1,666.67 if he sells it for £50k!

The seller of anything recently bought should always expect to lose quite a lot of money

Thank you, I realised shortly after I'd posted that I'd upped my original profit to £10K and corrected it at the same time that you posted.

 

[bigtwin]

So am I. One object of my post was to tell others that they need not accept any nonsense from a dodgy dealer that they must lose the VAT plus the other depreciation. I thought that this would be useful knowledge for others to have.

It was/is a useful explanation that I’m sure will be appreciated by others.

Ian

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[chaser]

What's the point of this thread, is he selling or buying, the price is what someone will pay no matter what it's made up of unless a business buyer who can get the vat back.

 

[funflair]

Whatever you call it though the dealer is going to take in an unused 2 months old van and knock a lump off what he gives you so that he can put on his profit and still sell less than new price.

Martin

 

[Bailey58]

Whatever, welcome to the best motorhome forum going, and coming.

 

[signworks]

 

[Jim]

What's the point of this thread,

To point out that you don't lose 20% the moment you drive out of the showroom as many people think.

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[filopastry]

I suspect one would only "loose" the difference between the value of "new" and "as new but used", still no loss or perceived loss, would occur unless the vehicle is actually sold. Anything purchased looses a "resale" value immediately, but one only suffers such a loss if one resells.

 

[ianthebuilder]

I’m glad I can’t afford to buy from a showroom!!

That was well above my pay grade!!

 

[WillH]

It's worth what it's worth, that is, whatever you get for it.

 

[ambulancekidd]

Every day is a school day.

 

[Simon Select]

So am I. One object of my post was to tell others that they need not accept any nonsense from a dodgy dealer that they must lose the VAT plus the other depreciation. I thought that this would be useful knowledge for others to have.

So who tried to stitch you up then?

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[Podney]

Welcome FW,hope you enjoy the Forum.
While you’re on a roll,is there anything else you’d like to get off your chest? Maybe generators, CMC site wardens,A frames,bxxxxt,snowflakes........now’s your chance,go for it!!!

 

[Cheshirecat57]

Apologies for my error in the dealer's VAT on a used van. I originally decided to add £5k profit but changed it to £10K but still had the VAT on £5K on my mind. The VAT charge on the £10K profit should of course be £2K making a final price of £52K.

See a thread entitled “is it me” within which I already busted this myth a couple of months ago

 

[pappajohn]

It was/is a useful explanation that I’m sure will be appreciated by others.

Ian

It was useful but a general introduction and bit of background first would have been better.

 

[pappajohn]

So please, stop regurgitating this myth that a van must immediately lose the original VAT charge as soon as it leaves the showroom. It is untrue. I hope this helps.

While we're at it can we stop regurgitating the myth A frames are legal and folks get gassed.

I won't hold my breath.

 

[The Wino]

I don't normally do forums but feel compelled to correct the misinterpretation regarding VAT on used motorhomes, where people claim that as soon as a van leaves the showroom it drops by 20% because of VAT. And it wouldn't be 20% anyway as VAT is only 16.66% of the RETAIL price! You might as well claim that you should lose the manufacturer's profit as well because that should only be charged once!

These are the facts: The original VAT is totally irrelevant when setting a price for a used motorhome. If a dealer has sold a MH for £50K but after a week the buyer decides that he doesn't want it and returns it, the dealer may give him say £44K as he knows that he can move it on quickly for £47K. Anyone who was happy to pay £50K for a motorhome would also be happy to buy it for £3K less knowing that it had never been used and had the full warranty minus just a few days.

I once bought a new car and sold it for more than I paid! It was a high end model that had a long waiting list and people where prepared to pay over the retail price. Again the original VAT charged was irrelevant.

So to sum up - when pricing a used van, the original maker's profit, the VAT and anything else are irrelevant to the used price. A product's used price is just a percentage of the new price and whether it's a house with no VAT originally charged, or a car or motorhome, the secondhand price is what a buyer would consider reasonable for its age and condition. A £100K van can be sold for £90K if it's as new and only a few weeks old.

The dealer's only VAT obligation on a used van is on his profit, so if he buys a van for £40K and adds £10K profit making it £50K he then adds 20% VAT on the £5K profit (£1K) making a total selling price of £51K.

So please, stop regurgitating this myth that a van must immediately lose the original VAT charge as soon as it leaves the showroom. It is untrue. I hope this helps.

I've been saying that for ages but think your idea is a bit out in the example of a new van being bought back by a dealer thats where the VAT myth starts so they can offer a huge reduction and sell on at a nice profit.

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[Louis]

Apologies for my error in the dealer's VAT on a used van. I originally decided to add £5k profit but changed it to £10K but still had the VAT on £5K on my mind. The VAT charge on the £10K profit should of course be £2K making a final price of £52K.

It’s ok everyone makes mistakes

 

[Lenny HB]

Agree with others strange 1st post.

When I traded my last van for 9% less than I paid for it new 3 years earlier I'm still trying to work out where 20% vat I lost went.

As I've always said salesman's BS, I still can't believe how many people get taken in by it.

 

[gus-lopez]

 

[bigtwin]

It was useful but a general introduction and bit of background first would have been better.

I was focusing on the positives!

Ian

 

[Minxy]

Apologies for my error in the dealer's VAT on a used van. I originally decided to add £5k profit but changed it to £10K but still had the VAT on £5K on my mind. The VAT charge on the £10K profit should of course be £2K making a final price of £52K.

Thank goodness for that ... I thought I'd lost the plot when I read the OP!

Welcome to the Fun House Francis.

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