Beat the VAT man - buy a car now

You've probably heard this quite a few times this year already – but now really is the best time to buy a new car.

Shelling out for a brand new motor around Christmas time isn't normally the first thing on people's minds, but this year should be different.

Why? Well, unless you've been hibernating, you won't have failed to miss the news that VAT is going back up to 17.5 per cent on 1 January 2010 from its current 15 per cent level. That means an increase of 2.5 per cent in the price of every new car sold in the UK. Put that in monetary terms and it equates to an additional £2,177 on an Aston Martin Vantage V8.

A recent investigation by weekly car magazine Auto Express found on average the VAT rise will mean an extra £350 levied on the price of a new motor and some manufacturers are even applying the VAT rise now.

Unless the invoice for your new motor is raised before 1 January, you'll have to pay the hiked price. Most buyers pay for their car when they collect it, so you'll need to talk to your dealer to see if they can help you avoid the rise by charging now.

However, there are deals still to be had. Skoda, for example, has an aggressive VAT free campaign that's running until the end of January. This makes a Fabia 1.2-litre, pre-VAT rise, £1,260 cheaper. The deal applies to Roomster and Octavia models too. Nissan, Renault and Ford have all also said they will let customers pay the lower rate if the car is ordered before the end of the year.

But it's not only VAT that makes now a great time to buy. The scrappage scheme which offers buyers a £2,000 discount if they chop in a car on a V-plate or earlier, is also coming to an end. Registrations under the scheme topped the quarter of a million mark at the end of November and are rising steadily.

The government has pledged £400m to the scheme – which equates to 400,000 cars – but it's due to end on the last day of February whether or not the money's been used up. This scheme really is a very rare opportunity to buy a new car with a huge, government-backed discount. Add VAT and scrappage together and buying a new car now, compared to this time next year, could save you thousands of pounds.

Having said that, although these unique deals will finish in 2010, it's highly likely car manufacturers will work hard to match them with their own schemes.

'The British car market remains very fragile,' said a spokesman for the SMMT. 'The government needs to sustain the recovery and generate business confidence by stimulating demand in key parts of the new vehicle market.'

Many industry analysts believe 2010 could be even tougher than 2009 with the VAT rate rise and end of scrappage putting buyers off. With unemployment figures rising and the recession still biting, car purchases are not high on the agenda for many. But those fears could mean some good deals for buyers still in the market – many makers are likely to offer their own scrappage schemes which could be extended to benefit younger cars not eligible under the current offer.

'We're working with our dealers to come up with a post-scappage scheme,' Hyundai UK boss Tony Whitehorn told Autoblog. 'Post-scrappage needs to be an opportunity for those that couldn't get a car under the scheme, because their car wasn't old enough, but probably wanted to.'

The Korean manufacturer has been one of the most successful brands with scrappage, doubling its annual sales. In November alone it was 561 per cent up – selling 5,634 cars compared to 2008's 852.

But we wouldn't advise waiting to see what car makers come up with. Ordering now and taking advantage of the lower VAT rate and scrappage scheme makes far more sense.

Deal or no deal

Here are some of the best deals available on new cars with scrappage and the lower VAT rate combined:
Kia Picanto, £4,195
Chevrolet Matiz, £4,595
Fiat Panda 1.1, £4,995
Hyundai i10, £5,395
Skoda Fabia, £6,450
Visit the manufacturer websites direct for the latest deals on scrappage cars)

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