Brown's VAT cut FAILS

Time 13 years ago


Brown's VAT cut has 'failed' car dealers

THE government’s much-hyped 2.5 per cent cut in VAT has failed car dealers, according to our report. 

An exclusive Car Dealer survey, in association with leading vehicle information organisation HPI, reveals the government’s carrot to get consumers buying has flopped.

Less than 15 per cent of new car buyers told us it would makxe them more likely to buy a new car – despite the VAT cut having the biggest impact of all on big-ticket items such as cars.

In contrast, 41 per cent said it is ‘unlikely’ to make them buy in 2009, and 10 per cent told us it was ‘very unlikely’ to work.

Damningly, 36 per cent of respondents said they would ‘definitely not’ buy a new car, despite the VAT reduction to 15 per cent. They’re just not swayed by the saving on a £20,000 car being £500 – and, on a £50k motor, £1,250.

Initial evidence, late in 2008, suggested that the VAT reduction may have an effect. Some dealers reported November was extremely quiet, as buyers wisely held off buying a new car. Chris Hayden, MD of Ford Retail, described November as being dead. ‘But December was a superb month, against trends of it normally being quiet,’ he told Car Dealer.

However, despite this initial flurry, it seems customers’ enthusiasm has faded. The realisation that the saving on an average supermini is less than £250 is undoubtedly having an effect.

This is easily shadowed by many of the special offers and promotions car dealers are running. What’s more, if someone is struggling to afford a new car, such a small reduction in list price is unlikely to sway them.

Daniel Burgess, automotive director at HPI, said: ‘Confirming our worst fears, measures by the government to incentivise buyers to the new market are well and truly failing. In total, a staggering 86 per cent of those we surveyed reported that the VAT cut had not motivated them to consider a new car purchase.’



James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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