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Vehicle tax is changing – is it time to think used car not new car?

Vehicle tax is changing – is it time to think used car not new car?

On 1st April 2017 the new VED (Vehicle Excise Duty) tax changes to come into force. So, what does this mean if you’re wanting to buy a new car? And would buying used now be a better option?

We thought we’d have a look at what the changes are and what it means for UK car buyers. First, let’s have a look at who it affects.

If I already own a car, will the new car road tax changes affect me?

No, they won’t. These changes only apply to people who are thinking of buying or registering a car after 1st April 2017. If you already own your car, nothing will change.

What’s changing under the new VED tax rules?

Well, the whole system is getting an overhaul, but here are the main changes. Firstly, low CO2 emission petrol and diesel cars will no longer be exempt from tax. Zero rates will now apply to zero emission cars only, so that’s electric and hydrogen powered vehicles.

At the moment, cars registered on or after 1st March 2001, with CO2 emissions of up to 100g/km – the number of grams of carbon dioxide the car emits per kilometer – pay zero tax. When the new rules come into play, those cars will be expected to pay tax of between £10 and £120, if they’re petrol or diesel. And cars that are classed as alternative fuel, which means hybrids, liquid petroleum gas (LPG) and bi-ethanol powered cars, will pay between £0 and £110.

Secondly, the tax rate for cars costing more than £40,000, before discounts have been applied, will change. The first year tax rate for these cars will, like all other cars, be based on the amount of CO2 the car emits. However, from the second year onwards, they’ll be a five-year supplement of £310 to pay, regardless of the fuel type. Then after the five years is up, the tax will revert to the standard rate for the fuel type.

Lastly, you’ll no longer be able to make 6-month payments for the first year, like you’re able to for some cars now.

So, what does all this mean if you’re thinking of buying a new car?

Sadly, it will mean you’re going to pay more tax if you choose to buy new. And it’ll be those people thinking of buying smaller, more economical cars that will suffer the biggest price hikes, with some tax increases of up to 950%!

Here are a couple of examples to show you how things will change:

First, the Ford C-Max 405TDCi (120) Zetec, which will see one of the largest increases. This car has a CO2 emission of 105g/km and currently attracts a first year tax rate of £0. After 1st April 2017, that will jump to £140. And the three year tax rate, which is currently £40, will now jump to £420, which is a huge 950% increase.

At the other end of the scale is the Seat Alhambra 1.4 TSI (150). People who want to buy one of these after 1st April 2017 will see first year tax rise from £145 to £200. At three years, owners will be paying £480 instead of £435. That’s an increase of just 10.3%.

How is the new tax calculated after the first year?

After you’ve paid the first years’ tax, you’ll pay based on what kind of fuel the car uses, plus an additional rate. So, for electric cars the standard annual rate will be £0, plus the additional rate of £310, making a total of £310.

If you have car that uses alternative fuel, you’ll pay £130 for the standard annual rate, plus the additional £310, making a total of £440. And for petrol or diesel cars you’ll pay £140 standard annual rate, plus £310, making an annual rate of £450.

You can see a full table of the new car tax rates from 1st April 2017 onwards here.

Avoid the car tax price hikes by buying a used car!

So, if you want to avoid the car tax price hikes, the obvious answer is to buy a used car instead of a new car. You may not have thought about doing this before, but now it may seem like a more attractive option. And you’d be in good company too, as sales for used cars surged to record levels in 2016, with that trend set to continue in 2017.

To find out what tax rates apply to the used car you might be thinking of buying, use the government’s car tax calculator.

How to buy a used car

You can still buy from a dealership, and use finance to buy it too. This way you’ll have all the normal retail protections you’d have if you bought new. If you buy a used car from a private seller, there are some other things you need to consider. The most important is the amount of protection you’ll get if something does go wrong. Have a look at the article below, it may help you decide which is the best route for you:

Dealer or Private Seller – advice on how to choose between buying from a dealership and going private.