When you’re buying a car, VAT can add a hefty extra price tag, charged at a standard rate of 20% for new cars. So, if it’s a second-hand car in your sights, you might want to know ‘is there VAT on used cars in the UK?’ The answer to this question will vary depending on how the car is purchased. Read on to learn more.

Eligibility: is there VAT on used cars in the UK?

Ultimately, this will depend on how you buy your car. Firstly, if you purchase your used car from a private seller, then there will be no VAT to pay.

However, if you buy your used car through a car dealer, then whether or not you are charged will depend on how the dealership handles VAT. For this, there are two potential methods. If you’re wondering ‘is there VAT on used cars in the UK?’, then it’s important to understand the difference between these…

Second-hand margin scheme

This is the method used by the majority of car dealerships and involves only charging VAT on the profits made from the sale of the car. The rate charged will be 1/6th of the profit margin.

This VAT will be factored into the price of the car, rather than being recorded as a separate charge on the invoice.

VAT on the full selling price

In some cases, the dealer may charge VAT on the full selling price, which will naturally be more costly. However, this method is rarely used due to higher tax charges.

According to This is Money, both of these methods are completely legal, and you should remain aware that car dealers are under no legal obligation to inform you at the outset of the method they use to record VAT. So, due to the potential increase in costs, you should discuss the VAT method with the dealership before making a decision about whether to buy.

Spread the cost of your car

Whether it’s VAT or just the rising prices of used cars, the cost of your new ride doesn’t have to keep you awake at night! Try our car loan approval calculator to discover how much car finance you could be eligible for. It’s a quick and easy way to spread the cost of your new or new-to-you car.

Rates from 6.9% APR. Representative APR 13.9%

Evolution Funding Ltd T/A My Car Credit

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Excellent

  • You are a home owner
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  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
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Good

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  • You may have had frequent changes in address
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£

X monthly repayments of
£X

Typical rate

Loan amount

Total payable

X% APR*

£X

£X

*for illustration purposes only

No impact on your credit score

Representative Example

Borrowing £7,500 at a representative APR of 13.9%, annual interest rate (fixed) 13.85%, 47 monthly payments of £201.38 followed by 1 payment of £211.38 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £2,176.24, total amount payable is £9,676.24.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!