2nd hand car prices still inflated?

[danlightbulb]

Because the system now is there to incentivise you to pick an electric car. This is the point. They do not want you picking a diesel or a petrol car, so the tax rates on these have been steadily increasing for years.

This is always how its worked - its always been there to encourage people to select lower emissions cars. It's not a surprise that higher emission cars are made expensive on such schemes - this is to discourage people from selecting them. All that has changed over time is what is considered to be a high emission car. Years ago it was cars with large engines, now its cars with basically all engines.




It doesn't matter what your perspective is.




Ok, so lets look at this from the way you think it should work.

Lets say that the benefit in kind tax is removed from the diesel in the first example.

The cost of the lease is £726 a month - this is what the car is costing your employer. You then have this taken from your salary before tax, meaning you save £305 in tax and national insurance. So now that £726 lease is only costing you £421 a month, before the application of company car tax.

But this is because the government is now losing that £305 a month in revenue from you. Why? Who should pay for that? What is the point in giving you a £300 a month tax saving for driving a diesel Peugeot? Why should anyone but you pay for this?

So, instead what happens is that the reduced tax is effectively made up (sometimes by more than the initial tax saving) for through benefit in kind tax if you select the 'wrong' vehicle. So, if you pick the diesel, there is no saving because nobody but you benefits from it, it may even cost you more.

The government has decided that it is happy to give up tax revenue to encourage people to select zero emissions cars. This is why, therefore, the benefit in kind tax is very low on the electric car. You make a considerable saving, so that when faced with the decision between diesel or electric, you go for an electric car.

As for why the diesels are even offered - why not? They are just orders through a lease company, if the car is available it'll be on the list.

I understand your point but consider it this way.

Job A is offered at 50k. No company car or car allowance.

Another job B is offered at 50k + car or car allowance (let's say nominally worth £5k).

It's right that job B is taxed with BIK for the car, because he is recieving a non salary benefit.

It's not right that job A is taxed BIK for a car because person A, if he has a car, is buying it out of his own pocket.


The whole point of salary sacrifice is to save on tax. Eg with pension relief, or cycle to work, or buying a computer on salary sac. There is no point using the scheme if you don't save anything, in fact it's often dearer than open market prices without the tax saving.

Why would a tax saving be offered on a diesel? It's still consumer spending encouraging growth in the economy, that's why.

 

[b0rn2sk8]

Job a is getting paid £50k, job b is getting £55k. You are taxed on your total package including benefits, not just the cash. Job and and job b are not equivalent.

let’s put it this way:

Job a is paid £50k

Job b is paid £45k and has a £5k pa company car.

Person with Job a sacrifices £5k of salary to get a car.

Job and and job b are taxes the same.


Yes I know the tax on the company car is dependent on what car it os but this is the super dumbed down example of what fox is trying to explain.

 

[[TW]Fox]

I understand your point but consider it this way.

Job A is offered at 50k. No company car or car allowance.

Another job B is offered at 50k + car or car allowance (let's say nominally worth £5k).

It's right that job B is taxed with BIK for the car, because he is recieving a non salary benefit.

It's not right that job A is taxed BIK for a car because person A, if he has a car, is buying it out of his own pocket.

I'll address this by asking again - if not you, who should pay for that £300 a month tax shortfall on the diesel car?

The whole point of salary sacrifice is to save on tax. Eg with pension relief, or cycle to work, or buying a computer on salary sac. There is no point using the scheme if you don't save anything, in fact it's often dearer than open market prices without the tax saving.

I agree, and the whole point in the benefit in kind is to discourage people from buying things you don't want them to be buying. In this case, diesel and petrol cars. The entire purpose is to make the deal such that you are not interested.

Looks like it works.

Why would a tax saving be offered on a diesel? It's still consumer spending encouraging growth in the economy, that's why.

Buy your own petrol or diesel car then, with your own money, directly. Whether you agree with it or not, the stated aim of government policy is to phase out the purchase of diesel and petrol cars. They do not want to encourage the purchase of them through tax incentives anymore. They did, once, but not anymore.

The reason why you give people tax breaks on things is to encourage them to do things you want them to do. Which, for cars, is buy zero emissions ones, not diesels.

 

[Journey]

Why would a tax saving be offered on a diesel? It's still consumer spending encouraging growth in the economy, that's why.

LOL. Just buy your own car on PCP/finance/cash then and stop moaning. Or get a BEV on SS and reap the benefits.

You can't have your cake and eat it... etc.

 

[b0rn2sk8]

Or a PHEV, nearly all the tax benefits of BEV, but not a BEV…

 

[Kenai]

I understand your point but consider it this way.

Job A is offered at 50k. No company car or car allowance.

Another job B is offered at 50k + car or car allowance (let's say nominally worth £5k).

It's right that job B is taxed with BIK for the car, because he is recieving a non salary benefit.

What salary sacrifice is doing is allowing Job A to decide for themselves they'd prefer their remuneration package to be £45k + car (non salary benefit), rather than £50k, so of course they're still going to get taxed.

Edit - with salary sacrifice non-ZE vehicles in particular, IIRC the rules are actually that you get taxed the higher of the BIK or the income tax that would have been due on the sacrificed income, which is probably why your two ICE examples conveniently balance out almost exactly - the quoted BIK is the income tax figure rather than the car's actual BIK liability.

 

[danlightbulb]

I see what you're saying.

The car salary sacrifice scheme is touted as an employee benefit at my workplace. Which is only true if you want an EV then.

In fact it would be quite risky even to buy an EV on the scheme, because the BIK values could be increased with minimal warning and you're stuck on a 4 year contract.

 

[Kenai]

I see what you're saying.

The car salary sacrifice scheme is touted as an employee benefit at my workplace. Which is only true if you want an EV then.

Yes, by design, salary sacrifice is only really an effective incentive for purchasing ZEVs now.

For ICE vehicles, there are nuances around which elements of the sacrifice are for the car vs for the maintenance/insurance etc. when it comes to the tax implications which in theory mean it could save some people a few quid but those circumstances will be few and far between.

 

[Kenai]

In fact it would be quite risky even to buy an EV on the scheme, because the BIK values could be increased with minimal warning and you're stuck on a 4 year contract.

In theory, yes but BIK rates have already been published up to 2028 I think it is and it's unlikely they'll be revised.

 

[Journey]

In theory, yes but BIK rates have already been published up to 2028 I think it is and it's unlikely they'll be revised.

Even less likely with new govt.

 

[Bint Box]

I think most people agree that used car prices are still inflated but its not just on the dealers forecourt. Auction prices are inflated which leads to dealers passing on the inflated auction price to customers and in some cases accepting much lower margins than they were previously getting.

From watching some auctions then following up on the specific vehicles when they get listed on Auto Trader the dealers are not making huge markups all of the time.
Sure, some of them are chancers who try it on with excessive prices but they then reduce the price to achieve a sale, easily monitored using the Chrome browser AT add in.

I have been looking for an SQ5 or X3/X4 M40 i/d so have been monitoring auction prices, here are a couple of examples:
SQ5 sold at auction £38K excluding fees, grade 3, needed quite a few panel repairs, sold by dealer for £41k, minimal margin considering prep required.
SQ5 sold at auction £42.8K excluding fees, grade 2, couple of smart repairs needed, sold by dealer for £45K, again minimal margin.
X3 M40i sold at auction for £40.4K excluding fees, grade 1, only needed couple of wheels refurbing, unsold by dealer, listed at £48.4K, dealer needs a reality check, never gonna sell.

Dealers are madly scrambling for good quality stock, most cars that are NAMA Grade 1 at auction with service history are going over CAP Clean book price. This in turn increases the CAP book prices which fuels the flames.
At some point this bubble will burst, it has to, end user customers will not pay the money. It looked as though the back end of 2023 was the start of the bubble bursting but from what I have seen recently, admittedly in the £35K to £50K bracket someone has used a puncture repair kit on the bubble and plugged it into a tyre inflater.

Thing is though, if a customer can get PCP they dont really care or have no other option re the extra £K's green they are shelling out to buy the car vs a cash purchase. This keeps prices high as there are buyers around.
I know it is never going to happen, but in my personal opinion, if PCP became less readily available to buyers, used car sale prices would collapse.

 

[danlightbulb]

I don't know if this is the right thread for it or not but what would you do in the following situation.

You have an 18 year old car that could fail at any moment. You rely on car so absolutely have to have one. And not some tiny useless city car either, has to be a good size hatchback or estate for mile munching and carrying gear whether that is suitcases to the airport or camping gear.

1. Private PCP lease.
2. Salary sacrifice scheme (has to be an EV).
3. A £10k personal loan over 5 years.

A £10k loan is £200 a month. Pcp I have no idea how much you need these days. Salary sacrifice schemes gets you an all in car (insurance Inc etc) but is over £400 a month and has to be an EV.

Given what we've been discussing and the way prices are, what's the best option here?

 

[danlightbulb]

From watching some auctions then following up on the specific vehicles when they get listed on Auto Trader the dealers are not making huge markups all of the time.
Sure, some of them are chancers who try it on with excessive prices but they then reduce the price to achieve a sale, easily monitored using the Chrome browser AT add in.

An efficient market ultimately leads to smaller to non existent margins. Economics 101. It will push out some dealers until an equilibrium is reached with margins the dealers can stomach.

Do have to question what the used car dealers do to earn their margin anyway, what value they add. If all they do is take an auction car and sell it on, they've done nothing extra. Even if they get it repaired, and sell at auction plus repair cost, there is still only minimal value add. Principle true of many types of good of course. Resellers of any product shouldn't get much margin as have done little to start with.

 

[b0rn2sk8]

snip

You are still seeing the impacts of COVID, if new car sales were restricted, everyone with money piles into the used market. We are in still in that magic 2-4 year period there all the cars that were meant to have been sold during covid should have been coming off leases/PCP but they were never built.

That's pushing up prices of 2-4 year old good quality cars in everything except BEVs. Far too many still think the battery will implode as soon as its 5 years old, will catch fire or you put the headlights on and you lose 30% of your range.

It's simple supply and demand. You are going to see that loss of production during COVID impact the used market for the next 10 years, that lost production isn't ever going to be recovered. New car sales are still down 20% on 2019.

 

[Bint Box]

An efficient market ultimately leads to smaller to non existent margins. Economics 101. It will push out some dealers until an equilibrium is reached with margins the dealers can stomach.

Do have to question what the used car dealers do to earn their margin anyway, what value they add. If all they do is take an auction car and sell it on, they've done nothing extra. Even if they get it repaired, and sell at auction plus repair cost, there is still only minimal value add. Principle true of many types of good of course. Resellers of any product shouldn't get much margin as have done little to start with.

The dealers often include a warranty for what it's worth, perhaps a year or so on an Approved Used Car. In addition they have staff wages and premises costs to cover and possibly interest costs on finance used to buy cars? I am not making excuses for them adding margin but they do have operating expenses just to open the doors.

Sometimes there is no need to include a warranty as the car is still under the manufacturers warranty. I had one dealer try to tell me it was costing them £750 to include a 1 year warranty on a car I enquired about, he was a bit lost for words when I told him the car still had one year remaining of the original manhfacturers warranty, just a chancer, plenty of them about.

 

[Bint Box]

It's simple supply and demand. You are going to see that loss of production during COVID impact the used market for the next 10 years, that lost production isn't ever going to be recovered. New car sales are still down 20% on 2019.

I can see the supply and demand point, as I indicated earlier it's visible at car auctions whenever a NAMA Grade 1 car with service history goes through. The dealers are all over them, last week I saw plenty going through auction at well over CAP Clean book price by amounts from £2K to £4K over, this is on £30K cars.

I think quite a few dealers are now ignoring CAP book prices and working backwards from Auto Trader prices. They estimate what it can sell for, deduct their margin including prep and that sets their maximum bid.

From what I have seen recently, prices for cars in the £30K to £50K show no sign of coming down, same might also apply to lesser priced cars but I have not been tracking those.
It could be as you say, we might be stuck with over priced cars for another decade. Oh the joys of living in rip off Britain !

 

[slinxy]

I don't know if this is the right thread for it or not but what would you do in the following situation.

You have an 18 year old car that could fail at any moment. You rely on car so absolutely have to have one. And not some tiny useless city car either, has to be a good size hatchback or estate for mile munching and carrying gear whether that is suitcases to the airport or camping gear.

1. Private PCP lease.
2. Salary sacrifice scheme (has to be an EV).
3. A £10k personal loan over 5 years.

A £10k loan is £200 a month. Pcp I have no idea how much you need these days. Salary sacrifice schemes gets you an all in car (insurance Inc etc) but is over £400 a month and has to be an EV.

Given what we've been discussing and the way prices are, what's the best option here?

The best option... is to save a raining day fund to buy a replacement when it's required.

I've been sitting with 10k in a bank account for that very reason...
I have the option of a PCP lease and Salary sacriface scheme but I don't need nor want a new car..

I want the safety of not having to worry about what happens to the car when I'm not there, people keying it (which happens a lot in manchester), people opening their doors and denting the side of the car..

I try and cycle and take public transport as much as possible. I only tend to use my car to go to the gym, where someone smashed the cover of my wing mirror, going to work as I live in the sticks and my work place is also in the sticks, it's impossible to take public transport. The weekly shop, going to car boots and to visit my folkes every so often.

 

[jpaul]

The best option... is to save a raining day fund to buy a replacement when it's required.

I've been sitting with 10k in a bank account for that very reason...
I have the option of a PCP lease and Salary sacriface scheme but I don't need nor want a new car..

other issue is the lead time to find a 2nd hand or new car meeting your criteria within acceptable distance if existing car has an issue -
been looking for 3 months - stock of appropriate cars is low, and dealers over-stocked with models sitting for months optimistically priced.

I drove past Hylton Gott volvo kings lynn the other day - how do they afford to have all the capital tied up in used cars, it's like land banking.

 

[slinxy]

other issue is the lead time to find a 2nd hand or new car meeting your criteria within acceptable distance if existing car has an issue -
been looking for 3 months - stock of appropriate cars is low, and dealers over-stocked with models sitting for months optimistically priced.

I drove past Hylton Gott volvo kings lynn the other day - how do they afford to have all the capital tied up in used cars, it's like land banking.

I went to look at a mini paceman a few weeks back from a small dealer, I knew I wasn't going to buy it but I wanted to see one in person before chasing them to find one in the spec and price range that I was looking for.

The small dealer claimed that has over 3 million pounds in car stock, the cars which he kept at his private home which was all prestige cars and he had a small lot not that far from his house.
Judging by the cars he had at his home, serveal beemers, mercs and a jags.. it's a lot of capital .

I'm kinda lucky, I guess I can get away with not having a car for a few weeks.. I just don't want to over pay for piece of **** and I don't really just want a stop gap car then have to deal with getting rid of it.

 

[Begbie]

Or a PHEV, nearly all the tax benefits of BEV, but not a BEV…

This is what I do, car costs less than £200pm. Incl insurance etc etc.

Absolute bargain.

Don't really care that it's a phev.