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While The Times has been busy 'revealing' that VED for older, high-emitting cars will increase, the real story for fleets is the impact that might have on residual values
The Conservative Party has been making great political capital over the apparent "secret" Government decision to increase road fund tax for older cars.
According to The Times, the Government has taken a "covert" decision to abolish "the exemption for older cars from the highest rates of vehicle excise duty. This means that owners of larger cars bought since March 2001 will find that their road tax will rise steeply from next April."
The Times also says this "revelation" comes amid soaring motoring costs and has only now been admitted by the Treasury.
In fact, as both The Times and the Tories both know, the decision to remove the concession on increased vehicle excise duty for higher polluting cars was announced in the Budget back at the beginning of March.
Like most of the detailed decisions announced at Budget time it was contained in the six chapters of supplementary documents that accompany the main Budget speech. Changes to car taxation (both private and business car rules) are generally contained in the chapter on the environment for reasons only a politician could explain, but at least we all know where to look for them.
So, Chancellor Darling stands accused of failing to specifically mention the change at the time and, I suppose, so do I because it was not highlighted in my Budget analysis. The question is: how much will it affect business car users?
My initial reaction was not much. After all, the concession only applied to cars registered before 23 March 2006 and, by the time the new VED rates come into force in April 2009, that will be three years ago. On the basis that the majority of business cars are being funded on a three-year cycle, that meant they were not eligible anyway.
Plus, in the overall scheme of things, a VED rate of £210 per annum is a relatively small cost compared to the purchase price, monthly contract hire rental and benefit-in-kin taxation charges that are being racked up by any high-emissions vehicle.
But, of course, this argument only holds water if you're looking at the running costs of the car during its lifecycle, rather than the hit you are likely to take at disposal.
The Tories and The Times may have been trying to score political points at the time of the local elections, but, by bringing the issue out into the open they also managed to accelerate the depreciation of any higher emissions car currently more than two years old - and that will hit the business car market.
At the time of the Budget I did discuss this with Adrian Rushmore, managing editor at EurotaxGlass's. I suggested that it would take a couple of years for the general car-buying public to catch up with the change because, in the excitement of buying a new car, most people don't focus on the VED cost; that comes a year later.
Rushmore, who is far wiser than me in these matters, responded: "There is likely to be greater awareness in the trade. They are likely to pre-empt the reaction by consumers and adopt a more careful and selective attitude to the purchase of these cars. That being the case prices may well ease sooner.
"Much will depend on customers' understanding of the changes. Awareness is important because most people making a used-car purchase today will retain ownership for at least the next three years."
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