VAT increase will hit motorists hard

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Indy Lifestyle Online

Research carried out by Auto Trader, which operates the heavily used autotrader.co.uk classified car ads website, shows that motorists may be in for a shock when the VAT rate is increased by 2.5% in January.

The tax hike will, of course, make itself felt in the prices of new cars but that's not the end of the story. It will also affect many of the other bills paid by motorists as well, including those for fuel and insurance, cranking up the total cost of ownership for most cars substantially. One small piece of comfort offered by AutoTrader's research; motorists will be able to limit the damage to their wallets if they downsize to a smaller car.

AutoTrader has done the sums on some of the cars that are the subjects of some of the most popular searches on its website. A Vauxhall Astra, for example that currently costs £18,205, will go up by £387 to £18,592, but the total cost of ownership for the first year will rise by £465 from £21,869 to £22,334, because of an increases of £51 in fuel costs and £24 in insurance costs caused by the VAT hike, and a £3 rise in annual car tax.

The benefits of down-sizing can be seen by comparing the figures for the Ford Focus and its smaller sister, the Fiesta. The first-year total cost of ownership for a Focus costing £16,567 will increase by £440 from £20,647 to £21,087 while, on the same basis, a £11,495 Fiesta will cost £291 more (£13,720 to £14,012).

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