Blue
I'm quite happy that the mark up is fair. (I should have stuck in a smiley at that point!)
However, if I may ask a supplementary question of you, as someone who knows the trade, would you say that "What Car?" is accurate about the mark up - or, to put it another way, what sort of mark up would the average dealer put on a trade-in?
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And repairing all the undisclosed faults, if you're buying a £4K car from a dealer you want everything to work
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Another measure, which has nothing whatever do with with any of those, is what is it worth to you? How much does it cost to run, and does it do what you want it to do?
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"Value" depends what you're doing with the car, hence the different figures given in the guides.
I also agree with Cliff Pope that a car's worth to you may be very different.
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Using your own time to clean, advertise, take calls, fix visits and take prospective buyers out in it is worth...............?
If you're self employed maybe £1,000; if you're employed, or happy to "work" Saturdays, you can "make" £1,000.
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Another measure which has nothing whatever do with with any of those is what is it worth to you?
It is worth what it would cost me to get another one which is exactly the same or better. Which seems to be about £4000. To which I should add a few pounds for sentimental value and the comfort of knowing its history from new!
>>How much does it cost to run?
Oh, about £600 per annum plus fuel. (roughly 39 mpg)
does it do what you want it to do?
Yes.
I note that no one has yet attempted to answer my original question, which was not about my car per se, but which used my car as an example.
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The value of a car is to me the figure that can be readily obtained on the open market. No waiting for a mug to come along, which might take weeks, or having to PX it aginast a more expensive purchase.
That means putting it into an auction, without reserve.
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>> I note that no one has yet attempted to answer my original question which was not about my car per se but which used my car as an example.
I did - or I tried.
I have only ever owned cars that I intended to keep indefinitely, so the "value" per somebody's guide has no meaning for me. My cars might on paper be worth £5000 or £50, but if they go on working and I judge that the costs are commensurate with the use or pleasure they give me, I don't care which. Of course, if you suddenly offered me £10,000 for my heap of scrap metal, I might just decide that I didn't love it quite as much as I thought.
That's only what I mean by value, as one backroomer. Obviously others will have totally different definitions that are equally valid for them.
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I did - or I tried.
Sorry Cliff. I also intend to keep cars indefinitely - so there is a sense in which monetary value and depreciation are not really relevant. That doesn't stop me asking questions that are purely of academic interest and prompted only by curiosity!
And then of course, there is the moment when one's vehicle is in an accident, and the insurance company decides to write it off, and the academic question suddenly is worth a few hundred pounds!
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A car is worth whatever somebody will give you for it. When trading in for another 2nd hand car you don't know what the dealer paid for it so you don't know how big his profit (or loss ) is. It all comes down to 'price to change' and whatever figure you're comfortable with then that's what it's worth.
nb
A dealer might buy a £5000 BMW at auction for £1000 so he's got £4000 to play with when giving you a trade in figure.
OR
You may fit £2000 worth of ICE to your £500 Corsa but when you come to sell it it's still a £500 Corsa.
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>>So - how much is my car actually worth? >>
It matter not, what matters is the cost to change: New car (N) - current car (C) = cost to change, which is best, like for like cars:
£10000 (N) - £5500 (C) = £4500 cost to change
£11000 (N) - £6000 (C) = £5000 cost to change
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You may fit £2000 worth of ICE to your £500 Corsa but when you come to sell it it's still a £500 Corsa.
The downfall of many a Max Power reader, that one which also applies to body kits, alloys, neon lighting etc etc.
Someone was trying to sell a heavily modded F reg Nova GTE for £2000 in our local paper last week, proudly claiming it had had "£2,000 spent on it in the past 2 years".
Cheers
DP
--
04 Grand Scenic 1.9 dCi Dynamique
00 Mondeo 1.8TD LX
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>> b) £3700 (Good mark up eh?) Not really once V.A.T. is taken off
No VAT on used goods is there????
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The dealer incurs output VAT on his margin, not the retail price.
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>>The dealer incurs output VAT on his margin, not the retail price.
So if he buys the car for 1,000, and sells it for £2,175 his profit is £1,000 plus VAT = £175.
Going back to OP's question, the answer in respect of his car is 'about £4,000'. You cannot say fairer than that.
The value of a £10 note is ten £1 coins. Most other things, the value depends on who wants to buy it on the day you want to sell it. In very few things is there a perfect market. Shares in BP are an exception - except even there the value goes up and down from day to day.
If two bidders at an auction drive it up to £4,500, then that was what it was worth. If it goes for teh reserve of £3,300 then that was what it was worth.
Simple.
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The difference between "retail" guide price and "trade" guide price is usually a factor of how difficult a car is to sell and how much potential liabilty it is for a dealer once sold.
Therefore, the typical guide price difference between the two prices will, for example, be small on a Golf TDI as it is an easy to sell car and doesn't go wrong that much but large on an Alfa 166 3.0 as a dealer may have to stock it for ages to sell it and if it goes wrong will be expensive to put right.
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Just to clarify: of course there is VAT on used goods and must be accounted for by a VAT registered business.
On cars it is sometimes stated seperately (a "qualifying" car) or is not stated but still exists in the margin scheme.
Example:
Dealer buys car for £1000
Dealer sells car for £1500.
If the car is VAT qualifying they will have paid £851 + VAT for it and sold it for £1277 + VAT. Nett profit: £425.60
If the car is margin they will have made a £500 margin and have to pay 500x.1489 in VAT, i.e. £74.40. Nett profit: £425.60
Either way, a legitimate VAT regsitered dealer does not make £500 profit.
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Mapmaker, your calculation is slightly wrong. It is not his profit+VAT. He has bought it for £1000 inc. VAT and sold it for £2175 inc. VAT. His profit is the difference between the ex. VAT buying price and the ex. VAT selling price. The extra bit he gets must be paid in VAT.
VAT exists on used cars but it is just not usually stated as a seperate amount unless, as I stated above, VAT was reclaimed on the car at first purchase and it remains a "qualifying" car until it is sold in a transaction where the VAT is not reclaimed.
Either way, the figures work out exactly the same.
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>>Mapmaker, your calculation is slightly wrong. It is not his profit+VAT. He >>has bought it for £1000 inc. VAT and sold it for £2175 inc. VAT.
WTGODR, pd, your understanding of the margin scheme is wrong, not my calculation. (By the way, 'slightly' wrong? Is that like being slightly pregnant? :) ) Most of us are not VAT registered. Therefore, he has probably bought it for £1000 and there is no VAT.
That is why the margin scheme exists for second hand goods. [Otherwise, if he wanted to make £1,000 profit he would have to sell it for £2,350 (£1000 cost, £1000 profit plus £350 payable to HMRC).]
As it is, in my example to make £1,000 profit he sells it for £2,175. And so HMRC get £175.
And if he bought it for £1,000 including VAT, then he still makes £1,000 profit.
I find that once you start using 14.893617021% people complain that VAT is actually charged at 17.5% so the illustration becomes less clear.
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Maybe I misunderstood how you were trying to describe it. You are correct that if you buy at £1000 and sell at £2175 the profit after VAT is £1000 - I think we're trying to say the same thing in different ways.
My point was that whether margin or not the figures work out just the same and the VAT always exists it is just not stated seperately.
i.e. if the car was qualifying the purchase invoice would read £851+VAT and the sales invoice £1851+VAT = profit of £1000.
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