A UK Car Import Could Cost You 20% Less Than Advertised
UK VAT is a simple concept to understand. All the pricing you see on the internet includes VAT, but if exported, some cars are eligible for 20% off the advertised price, otherwise known as a VAT Free car. You just need to know which questions to ask and you’ll be negotiating your way to a much better deal.
UK VAT is charged at 20% of the net purchase price of the item. A car purchased for private use i.e. family use will automatically have to pay 20% VAT as part of the purchase price. When shopping for cars, all car prices you see on the internet include VAT. For example an Auto Trader car advertised at £12,000 will be £10,000 in purchase price and £2,000in VAT. Trucks and commercial vehicles quote not including VAT, so watch out for how it is written.
Why are there VAT free cars?
A UK vehicle which has been used and registered for business use is exempt from VAT. This is known in the trade as a VAT qualifying vehicle. Here are four examples of vehicles which are VAT qualifying;
Spotting the VAT qualifying vehicles
1. A brand new car.
2. A car which has been used by a dealer as a demonstrator.
3. A car which has been owned by a lease company and driven by a sales executive.
4. A commercial vehicle such as a Nissan Navara, light commercial trucks and lorries, prime movers which have only been used for business. Interestingly, Land Rover Defenders are often priced without VAT as they are often considered commercial vehicles too.
At the moment the car is sold to a private owner for private use within the UK the 20% VAT is payable and the possibility of reclaiming it is lost. Through their lifecycle cars usually become privately owned, so finding an older VAT qualifying car becomes increasingly difficult. There are many more VAT qualifying cars to be found which are 1-2 years old. There are rare gems out there which are 5 years old or more, but finding them is like panning for gold.
Key phrases to know
The power of the internet allows you to find these cars for yourself. There are three key words or phrases you need to look out for. ‘Demonstrator’ is a buzz word,or look out for the phrases ‘Gross VAT qualifying’ and ‘VAT Q’. All three phrases or abbreviations show you that the car is eligible to have the VAT reclaimed from its advertised price. You can often enter these into the advanced search option in a website to shortcut your search to these real gems.
The export benefit
If a VAT qualifying car is sold for export outside the European Union, the VAT is reclaimable. So you can negotiate 20% off the purchase price from your dealer. There are three ways you can go about this:
1. Buy directly from an UK dealer and negotiate the VAT off with them. They then have to process the reclaim themselves, which many are very reluctant to do.
2. Buy your car directand reclaim the VAT via HMRC when you export it. (Not a popular choice for overseas residents)
3. Buy the same car via an import broker like MHH International who is willing to pass on the VAT saving to you. Then you see the cost benefit without the complexity of managing the paperwork yourself.
The internet has de-mystified many industries and given buyers a much stronger negotiating position over the past 10 years. Car importing is catching up. Now you know what to look for, you need never pay UK VAT on an imported vehicle without knowing it. Go out there, and snap up a gem of a deal. A little bit of knowledge can go a long way, so here are a few more key tips to help your import go smoothly.
Top UK importing tips
1. Make sure who you are buying from is a legitimate company: Check for them on Companies House in London if in doubt.
2. Make sure your final agreed pricing includes all import costs. For CIF (Cost, Insurance and Freight) you need to know: collection and delivery to the port, preparation and inspection, shipping and insurance.
3. Make sure you are buying a UK spec car. The specification is often higher than international variants. This gives you better value from the outset and a better residual price later on if you have taken good care of your car.
4. Mileage is verified via an HPI check by your dealer. The national mileage register highlights any strange mileage entries to help buyers avoid odometer tampering.
5. Make sure you receive the original paperwork for your car once it is one the water. You should insist youreceive the original V5 log book and the original service history. You should also ask to see the photos of them before you buy asthese prove original ownership and care history for the vehicle.