Reply With QuoteI think it's something to do with VAT with pre reg cars. Makes it a lot more profitable than selling it new.
Could be wrong but I'm sure that was how it was explained to me.
Recently my wife and I decided to get respectable and trade in our two cars for one, one slightly more appropriate to our advancing, no advanced years . My car was a year old MX5 Mk 4, 1.5 Sports Nav with 1400 miles on the clock. Her's was a two year old Mini Cooper S convertible with 11,000 miles recorded.Both these cars had been bought with hefty discounts as both had been preregistered. From memory we paid about £19,000 for each, both cash with part exchanges. Now we knew we were into taking a bit of a hammering but hey, life's too short to worry about things.
We decided on a pre reg Mercedes 250d AMG line, list with extras £39,000, pre. reg with 2000 miles £29,000. And yes the nice man at the dealership said, two cars no problem. He disappeared into the back office and emerged announcing £200 would make us the owners of a nice shiny Mercedes. In fact it was really less, he threw in about £400 of paint protection.The actual PX prices were £13,000 for the Mini and £15, 800 for the Mazda, both higher then WBA
Now fast forward to yesterday. Miserable weather and I spent some time looking at personal number plates on the DVLA site, then as an aside typed in the number for my old Mazda , not taxed, was the result. So tried the Mini with the same result, funny why? Then the idea struck me, perhaps still on the dealers forecourt. Typed in Auto trader and found them.. Both are with another dealership, Evan Hailshaw of Leicester. The Mini is up for £13,622 i.e £622 more then the Mercedes dealership paid and the Mazda is priced at £16,192, only £392 more.
I just don't understand the figures. The dealer pre registers a Mercedes, sell it for £10,000 under list price and then sells the part exchanges on at a price that the third party buyer can afford to sell at a mere £1,000 ish more then me, the original customer received.
I know the story of the two New York Jewish car dealers who made a living selling the same Cadillac to each other but what gives?
Perplexed.
Last edited by BrianT; 30th December 2017 at 11:03.
I think it's something to do with VAT with pre reg cars. Makes it a lot more profitable than selling it new.
Could be wrong but I'm sure that was how it was explained to me.
The dealers obviously made his/her fill from the sale of the Mercedes (maybe Mercedes offered big discounts to move certain models?) and your trade ins were just a nice thin icing on the top.
This is the reality of the market. Used car margins are suppressed (mainly down to the web, consumer intelligence and competitiveness). Gone are the days you could mark £1000's across cars. Volume is king now.
As for the pre-reg, it is unlikely they have made any money on that 1 sale. Normally a pre-reg unit attracts extra discount from the manufacturer, on top of the original vehicle profit margin. These are normally loss leaders.
Were the money is made however is on overall registrations. The manufacturer will pay a back end bonus based on units registered. This can be a lot of money and hitting/ overacheving is how dealers trade now.
Last edited by Gavbaz; 30th December 2017 at 11:28.
It's this, ^^^ volume bonus, model run out, diesel, vat, pre-registration combination of any or all, (back end profit).Originally Posted by IAmATeaf
"Once is happenstance. Twice is coincidence. The third time it's enemy action."
'Populism, the last refuge of a Tory scoundrel'.
Good explanations given - I'd leave the perplexed state, perhaps a bit of mutual back slapping is in order for you and the Mrs on the good deal you got..
Have a happy motoring new year!
Re VAT just found this from " Honest John"
The VAT issue is a red herring. What you get is a discount equivalent to the VAT. Of course the VAT remains applied to the lower price of the car bringing the price you pay plus VAT to around 16.6 per cent less than list. Do not confuse 'VAT free' offers with VAT on ‘VAT qualifying’ cars. A member of the public can never buy a car VAT-free. A trader or a leasing or rental fleet can reclaim the VAT element of a VAT Qualifying car, but must then charge VAT at the rate of 20 per cent on whatever he sells the car for. So say he buys a VQ car for £10,000. He can reclaim £1667 VAT, but if he later sells the car for £11,000, he must then return £1833 in VAT to HM Customs & Excise.
Another VAT thing to remember is that , the dealer pays VAT on the profit margin on a used car sale. So , If the dealer buys a car for £10,000 and sells it for £11,000, he has to pay VAT on the £1,000 margin, leaving him/her with £800. If they had to spent £200 on a service or a pair of tyres, for example, they can't reduce the profit margin accordingly and pay a reduced VAT element.
OP, my betting is the actual cost of the merc to the dealer is far lower than you think, we recently looked at buying an E class Merc, the sales guy told us to look at the deal he was offering on four door C class, merc were putting up a £10k subsidy,
Never say never, we have just ordered a brand new VW in colour of our choice with a few tasteful optional extras, completely VAT free.
And before you question it, the car will be registered disabled class so no Road fund license either and all associated expenses on the car will be tax exempt also.
Are you unhappy with the deal?
When you look long into an abyss, the abyss looks long into you.........
No, indeed I am well pleased. But I thought the the mark up on the two cars I part exchanged was very small.
I think the car market is about small mark ups and pre-reg discounts on turnover and volume.
The guy who tiled our house played a tale about his new van purchase - he had a P/X and was paying cash, the price for the P/X was low and when he raised this and declined, the dealer said he was a 'nightmare of a customer' in that he had no P/X to make some money on and no bonus form a finance deal.
Indicative perhaps?.
When you look long into an abyss, the abyss looks long into you.........
Im sure there is some VAT saving to a dealer on cars that they have had on demo, or preregistered, for over 6 months before selling. Or at least there used to be - I bought a number of sportsbikes years ago as “demos” with low miles or no miles, and the dealer said they saved the equivalent of tax on them as having been used by the dealership. I’m guessing they get VAT relief on the full price when they put the vehicle on demo, but only pay vat on the lower selling price?
Last edited by Omegamanic; 31st December 2017 at 00:04.
It's just a matter of time...
Have heard similar, a friend of mine tried to buy a pair of pre-reg Transit Custom vans for their construction business and were refused a cash sale. Vehicles are just the by-product of a finance sale these days.
When I worked for Natwest 20+ years ago, the bank had a fleet of 10,000 cars which it bought at around a 35% discount and sold on after 3 months for around a 25% discount to list, ie, at a profit. Meanwhile some of the big manufacturers like VW were already making more money on the financing of their car sales, than they were from the margin on the sales themselves.
Yes I was told by a representative of Hertz that they did the same thing.
However my bit of surfing provided a a little insight into car dealing.
If anyone is looking for a really nice MX 5 mk 2 Sports Nav in Meteor grey, try Evans Hailshaw Leicester branch, about £7000 saving on new, only done 1400 miles and perfect, nice reg inc, I didn't bother retaining it, MX 05 BET wouldn't be the same on the new Car .:)
Last edited by BrianT; 31st December 2017 at 12:14.
With typical car finance deals can you pay them off after a few months with no interest penalty?
I bought my new kitchen that way, the sales person explained this and said he could give me an extra discount if I did finance, and it’s only cost me a few hundred quid in interest.
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