The new Vehicle Excise Duty regime will hit the car rental industry with a 400% tax rise, damaging its ability to purchase the newest, cleanest vehicles and provide affordable mobility to millions of customers.
A new report from Oxford Economics, commissioned by the British Vehicle Rental and Leasing Association, has found that the rental sector will be unfairly hit by the government’s decision to increase VED rates and remove the ability to claim a refund for any unused first-year tax from 1 April 2017.
The report found the average duty paid for rental cars, which have a typical fleet life of nine months, will rise from £36 in 2016 to £170 from April 2017. As a result, the rental sector’s overall first-year VED bill will rise 400%, from £11m in 2016 to £55m in 2017, with the lack of refund responsible for £14m of this.
In its 2017 Spring Budget submission, the BVRLA has called on the Government to defer or stagger the VED increases and retain the ability for owners to obtain a full refund of any tax outstanding when a car is sold in the first year.
It expects members to buy about 24,800 fewer new cars this year, an 8% cut on the 324,000 annually acquired, and this will impact on car makers’ registrations and profit margins, pushing greater emphasis on retail or private sales, which are often more susceptible to interest rate changes and financial concerns of families.