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From The Times May 1, 2008
Road-tax hike makes thousands of family cars almost worthlessBen Webster, Transport Correspondent
Tens of thousands of cars will become almost worthless as a result of the decision to raise road tax on older models with higher carbon dioxide emissions by up to £245 a year.
Many families will find that they cannot sell their cars even though they are in good working order and no more than seven years old.
The Times revealed yesterday that the Treasury had quietly abolished the exemption from higher road-tax rates for cars that emit more than 225g of CO2 per km and were registered between March 2001 and March 2006.
CAP, which supplies the used car industry with data on residual values, said that many larger cars would be reduced to their scrap value because they would fall into one of the higher tax brackets being introduced for high-emission cars next April.
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A Hyundai Lantra 1.6GSI automatic, registered in 2001, is listed as having a trade value of £850. But under the rules buried in the small print of last month’s Budget, its road tax will increase from £210 this year to £300 next year and £430 in 2010.
CAP estimated that the road tax increase would cut 20 per cent, or £1,000, off the value of a 2001 Renault Espace 2LT Privilege people carrier.
Mark Norman, CAP’s development manager, said: “When people find out that it could cost half a car’s value just to tax it each year, its value will plummet. Many of these cars, particularly saloons, will be reduced to their scrap value. The sad thing is that perfectly usable cars will be scrapped, which could perversely increase overall CO2 because of the emissions from manufacturing new cars.”
He said that the changes to vehicle excise duty would hurt most those who were least able to afford it. “Poorer families who need a bigger car to transport children and luggage will find their car has lost up to £1,000 of its value. They face an impossible choice because many will struggle to pay the higher road tax but won’t be able to afford to buy a more fuel-effi-cient car with a lower road-tax rating.”
The new higher road tax will particularly penalise drivers who have fuel-hungry cars but do low mileage.
Adrian Rushmore, managing editor of Glass’s used car guide, said it would add to the impact that high fuel prices were having on residual values. “Fuel costs have increased by 25 per cent since January last year and higher road tax will help accelerate the trend towards faster depreciation for less fuel efficient models. The motor trade needs to tell people thinking of buying one of these cars that they will face a big hike in road tax from next year. That may influence their decision.”
He said that fuel-hungry cars were depreciating faster than more efficient models. The average three-year-old car last month was worth £600 less than the average three-year-old car in April last year. But for cars with CO2 emissions of more than 225g/km, the difference was £2,000.
Cars registered before March 1, 2001, will continue to be exempt from the higher road-tax rates. Many of these cars will become more valuable than similar models that are younger and have done fewer miles but are liable for double the road tax.
The Treasury admitted yesterday that it had failed to make the tax changes clear in the Budget. A spokeswoman said: “It’s not as clear in the Budget as it could be. It’s not explicitly spelt out.”
Justine Greening, the Conservative Treasury spokeswoman, said: “This is duplicity from the Treasury who deliberately failed to make any mention of this tax grab at the time of the Budget. Last year Gordon Brown promised not to backdate the CO2 charge on family cars to before 2006 and now he’s broken yet another promise.
“This hits tens of thousands of drivers and the worst hit are low-income families who can’t afford to change cars regularly. These are people driving family cars, often bought secondhand, with 80,000 miles on the clock. Alistair Darling said that the Budget would leave a typical family earning £28,000, with two children, £130 a year better off, but many will be paying an extra £220 in extra vehicle excise duty because of these changes.”
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