Car insurance owners try to beat VAT

Wednesday, 30 June 2010

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One in eight drivers may need to change their car insurance sooner than planned as they attempt to avoid paying the higher VAT by purchasing their next new vehicle early.

Middle to high-income earners are the most likely to take to the forecourts before January, although research by GfK NOP Automotive indicates that four in ten motorists in the UK have similar inclinations.

Chancellor George Osborne's decision to raise VAT to 20 per cent in last week's emergency budget is also expected to boost used car sales, with one in ten people (12 per cent) admitting they will consider buying a second hand vehicle as a result.

This is despite the fact that used cars are VAT exempt.

Commenting on the findings, GfK NOP automotive expert Mark Durham explained: "The Budget's impact on the motor industry will be felt for a long time.

"However, longer term, manufacturers and dealers will need to find ways to ensure the market doesn't dip after the VAT increase, perhaps absorbing the VAT and insurance increases themselves."

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