DRIVE TIME! MOTORING NEWS

What it means for Business

Car sales have taken a hit this year, with sales down 23% in March compared to the same period last year. The economy is partly to blame, but another reason is the uncertainty surrounding the new VRT and road tax lasws, which are to come into affect on July 1st.
From July 1st, on new cars and cars imported from other markets, you will pay both VRT and road tax based on the amount of carbon dioxide, or CO2 that your car produces.

There would appear to have been a drop in sales partly because of consumer uncertainty. So here it is in simple terms. Depending on the type of car that you intend to buy, some cars will increase in price, whereas some will decrease in price. A rule of thumb is that medium to large petrol cars and largeer diesel engine cars ate likely to increase in price and be subject to larger annual road tax, whereas many fuel-efficient petrol and diesel engine cars are likely to reduce in priceand road tax. Put even more simply, the more fuel you use, the more CO2 your car produces and that means more VRT and road tax.

One market that is likey to be affected quite significantly is the executive market. Up until now, VRT was quite a brutal tax and it meant that most executive cars, which tended to be over2.0-litre, were hit with the same 30% VRT and there were only a few cars which managed to sneak under. Some brands offered lower powered and strictly speaking, underpowered 1.6-litre, 1.8-litre and 1.9-litre diesel engines and in many cases these became the preferred choice in this segment. You then paid your road tax according to the cubic capacity of the engine and that was pretty much that.
But now things look set to change significantly in this segment. With the VRT and road tax laws not changing to be based solely around the CO2 that a car produces, this means that the goal posts have been moved quite significantly. Now what comes out of the tail pipe is more important than what is under the bonnet and the old rules have been thrown out of the window.

DIESEL TECHNOLOGY

What we are likely to see is a dramatic switch from what was a petrol dominated market, albeit with low capacity petrol engines, to more emphasis on diesel technology. Since some diesel engines are much more fuel efficient than their petrol counterparts, this adds up to lower CO2 emissions and consequently, lower rates of VRT and road tax, making them much more attractive buys.
The highest VRT rate used to be 30% and this covered quite a large number of cars, namely any over 2.0-litre. And the highest road tax you would pay would be €1,491 per annum. However from July 1st, the highest rate of VRT will be 36%, applied to cars that produce 226g/km or over and these cars will be subject to an eye-watering €2,000 per annum road tax.

HYBRID

Larger-engined petrol cars, and older larger diesel engines are likely to be the worst hit. While brands like Lexus will be able to further boost the appeal of the Hybrid engines, the same brand will need to bid farewell to the hope of selling many of their other petrol engines. Take the Lexus GS range for example. The new GS line-up was unveiled recently, with most of the focus on the reduced price of their Hybrid version, which will soften the blow of the likely increased price of this version from July, when a long-standing 50% rebate in VRT for hybrids is capped at €2,500 from July 1st. While the Hybrid, with its 185g/km of CO2 means it will reside in Band E, with a reasonable 28% VRT and €600 road tax, its less expensive GS300 petrol sibling, because of its 226g/km of CO2 will see it VRT jump from 30% to 36% and its annual road tax jump from €1,231 to €2,000 meaning it will become a hard choice to justify.

FLEXIFUEL

The same is true of cars that run on E85 bioethanol. While there had been a 50% VRT rebate for all of these so-called “Flexifuel” models, which run on a blend of 15% petrol and 85% bioethanol, a fuel manufactured from renewable sources such as biomass, sugar cane and in the case of Ireland – cheese! This capping of the VRT rebate on these models might not affect the Ford Focus Flexifuel much, but it is significant for cars such as the Saab 9-5 BioPower and Volvo V70 Flexifuel. But these cars now and you can save around €7,000, which is significantly more than the €2,500 reduction from these cars from July 1st.
Meanwhile, its rivals, such as BMW’s 5-Series diesel, especially the 520d, will fall the opposite direction. While its 2.0-litre diesel engine would have commanded a top rate of VRT of 30% and €590 road tax, the most fuel efficient version they do, with its 136g/km of CO2, will see its VRT rate drop dramatically to just 16%, slashing the purchase price and it will cost just €150 per annum in road tax.

PRICE

The road tax issue is a significant one for many executive car owners – choosing the right car could save you several thousand Euro over the course of a car’s lifetime and that is certainly not to be ignored.
The key things to remember therefore, if you are considering your purchase for either July, or indeed for January 2008 are the CO2 figures that your car produces. These will determine not only the purchase price of the car but also the road tax that will apply to the car over the course of its life. The same applies to imported models too. If you import a used car from the UK, which has become increasingly popular over the last number of years, you will need to show its CO2 figures when importing the car and the VRT will be calculated using this, as well as the optional extras. If a CO2 figure cannot be obtained, then it will be charged at the maximum rate of 36%, making the importation of some older vehicle very unappealing indeed. This, it is hoped will go towards cleaning up our national fleet in the long run.