Hassle and Vattery

We have been privately leasing an Audi A6 through VW Finance for 2 years, with the option to purchase at the end, which we decided to do. We were verbally quoted the price in mid November and the purchase was finalised on 8 December. In the interim VAT was reduced by 2.5%. When I queried VW finance as to whether we were entitled to a VAT refund their reply was that "this vehicle was purchased without an individual VAT price, these (sic) are only applicable with our commercial vehicles and so the price paid was correct." Do you think this is correct?

Asked on 14 February 2009 by

Answered by Honest John

If you have been leasing the car, the initial VAT was recovered by the lessor, making your car a 'VAT qualifying' car. If the car is then sold to the lessee, the VAT rate that applies is the rate on the date of sale. So, say the car originally cost £23,500, £3,500 of that would have been VAT that the lessor reclaimed. If the lessor is now selling you the car for, say, £10,000 + VAT, it should be £11,500, not £11,750. Not that £250 is a huge difference.

Tags: vat road tax leasing owning

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