Powerful cars, motor tax and depreciation

marathonic

As we all know, and much to the annoyance of anyone with an interest in cars as more than a means to get from A to B, the Irish market is obsessed with motor tax rates and used them as a major influence into what they decide to buy.

Of course, the big cost in car ownership is depreciation. However, the Irish obsession with motor tax rates means that, to a certain extent, depreciation is correlated to the motor tax band within which a car falls.

Take for example the Kia Cee'd GT 1.6. This would be a reasonably powerful petrol car at the cheaper end of the market that, in late 2015, had a facelift that, among other things, reduced the emissions from 171g/km to 170g/km - bringing it from €750 to €570 for motor tax. In this case, a more valuable 2016 car is going to depreciate slower than a 2015 car. There will also come a point, and not in the too distant future, where someone buying a car at this budget is simply unwilling to pay the €750 road tax and the car will become almost worthless.

Setting aside the above example at the cheap end of the market, I'd like some thoughts on the same topic but further up in the motor tax bands.

At Band G, the car choices are limitless but the motor tax is €2,350. Typically, someone buying a new car at this level would be looking for the grunt of a V8. At the lower end of the scale, you'd have a Ford Mustang 5.0 V8 at €62,000 new. The new buyer here shouldn't have an issue with €2,350 tax. However, I'd imagine that the pool of buyers with €30,000 to spend on a 3-year old model will be pretty low. Do you think a car like this will reach a point where it's virtually worthless or will it reach a floor where a typical used buyer knows that they are simply replacing the depreciation incurred with a typical purchase with the exorbitant tax for a Mustang?

colm_mcm

Ceed GDI 1.6 is a bit of a red herring. The market has moved towards turbocharged petrols. It's the engine from the Veloster, which itself didn't sell well. There is a new 1.0 which will be the volume on petrol model.

marathonic

I suppose a good example to discuss this would be the long-running Audi S5.

A 2011 4.2 V8 will be in the €2,350 band. The 2012 3.0 model will see your annual tax drop to €750. The model introduced this year would see it fall further to €570.

I see a 2010 4.2 on Carzone for €26,950 and a 2012 3.0 for €36,950. Just with the €1,600 difference in tax, surely a 2012 is always going to be worth €10k or so more than a 2010. I imagine the 2010 here will be almost worthless by the time it reaches 10 years old and depreciation of the 2017 model has pushed the 2012 model closer to €20k-€25k.

bmwguy

Yes, the tax will have a correlation with depreciation.

The higher the tax the less demand second hand
Less demand means lower pool of buyers hence lower resale price

This applies on all regular, mainstream cars that sold in large numbers, take the BMW 520D for example that everyone knows.

Go onto done deal and compare prices of 2007 cars v 2008 cars. Huge price drop to the 07. Tax price difference is about 300-400 a year.

One area that is exempt is genuine sports cars, I.e. m3/m5 kind of car that always command decent money despite being in top bracket, but they are enthusiasts cars.

The value is in the high tax stuff, as strange as it sounds. Not the 2,350 end of things that's just insane but the 700-1000 bracket that people consider too high.

marathonic

The cars I've been looking at before starting this topic are used buys, or potential used buys in a year or two, from the UK.

Basically, I've been looking at the 2014 Jaguar XFR and 2014 C63, both of which would fall into the €2,350 band. However, I fear that the depreciation will render both worthless eventually - albeit, I imagine the potential floor to prices will be higher with either of these than the Mustang.

At the end of the day, moving from the €2,350 band to €1,200 band saves you €1,150 per year but, assuming a depreciation rate of 20% p/a, someone paying €3,450 extra for a typical car in the lower band will simply transfer the cost from tax to depreciation.

I guess the man maths leads me to the believe that buying a car like the 2010 Jaguar XKR on Carzone at €48,500 and keeping for 4 years would work out cheaper over 4 years than paying the same for a 2014 Audi S5 and upgrading to something similar after 2 - despite the additional €6,400 motor tax.

Basically, settling for a 'lesser' car out of fear of the €2,350 tax band could cost you more in the long run if this results in you upgrading more frequently.

Just reading bmwguy's post above, I guess it boils down to "do not fear high tax if the car you're buying falls under the category of "enthusiasts cars" but be careful buying the likes of a Kia hatchback with €750 tax".

All being said, I keep coming back to thinking that there's no man maths on earth that can justify buying a car in the €2,350 band. I mean, if power is of the main concern, why go for an XFR when you can go for an Alfa Romeo Giulia Quadrifoglio with 510hp and costing the same €750 to tax as the aforementioned Kia .  Who'd have thought we'd see cars like this fall into the €750 band so soon. All we need now is a load of depreciation and a reasonable valuation from the VRT evaluators (that's some wishful thinking right there).

goochy

Would love to see a few hundred high tax cars drive through dublin city - causing big traffic jams and tp get government attention - preferbly not those that have just been bought new recently as that would not get much public sumpathy. simi aren't bother as it's not really in their interest . We need to show them car lovers / enthusiasts are being unfairly treated

cnocbui

Move to another country, it's the only sensible solution.

goochy

Yes but few are as good as dear old Ireland

marathonic

cnocbui wrote: »

Move to another country, it's the only sensible solution.

I personally think the Irish government will revamp our motor tax system in the next year or two with all the recent science around the effects of diesel emissions.

I quite like the UK system that came into effect this month:

• First years tax is based on emissions and adds a significant premium to higher emission cars;
• Subsequent years tax is a flat £140, regardless of vehicle type or emissions;
• £310 premium is added in years 1-5 if the vehicle cost more than £40,000

Basically, at the very highest end of the motor tax system, you'd have a vehicle emitting 255g/km+ and costing over £40,000. The motor tax would be:

• £2,000 for year 1 + £310 premium for car value;
• £140 tax + £310 premium for car value in years 2-5;
• £140 from year 6 onward;

It's basically going to cost £3,690 for the first 5 years tax and £140 after that.

Del2005

marathonic wrote: »

I personally think the Irish government will revamp our motor tax system in the next year or two with all the recent science around the effects of diesel emissions.

They will most definitely be revamping the motor tax system, but it'll only be for increases on diesel and EV. There's no way they'll reduce the pre 08 tax and CO2 emissions will be treated the same, with a penalty for the really bad sh!t that comes out the exhaust. They'll have to start charging motor tax for EV's now or else we'll be completed screwed when they become mainstream, that's if we even own cars by then!

cnocbui

Vehicles should only be taxed by weight.

Sabre Man

Del2005 wrote: »

They'll have to start charging motor tax for EV's now or else we'll be completed screwed when they become mainstream

There is already motor tax on EVs.

marathonic

Del2005 wrote: »

marathonic wrote: »

I personally think the Irish government will revamp our motor tax system in the next year or two with all the recent science around the effects of diesel emissions.

They will most definitely be revamping the motor tax system, but it'll only be for increases on diesel and EV.  There's no way they'll reduce the pre 08 tax and CO2 emissions will be treated the same, with a penalty for the really bad sh!t that comes out the exhaust.  They'll have to start charging motor tax for EV's now or else we'll be completed screwed when they become mainstream, that's if we even own cars by then!

The new UK system is not retrospective so they wouldn't be losing the current tax base by introducing something similar. 

One of the big advantages of the UK system versus the Irish is the ease of planning for the government. Over the years, cars are emitting less and less but the number of cars on the road, if anything, is increasing slowly. It'd be a sustained income stream and they wouldn't have to keep on top of advances in car technology and their associated impact on the emissions of cars on the road. 

It's been done to death but, as we all know, the average miles done over the lifetime of a Merc C63 is miniscule compared to that of the average 2.0TDI Audi A4. 

Looking at UK Autotrader, two thirds of 2 litre diesels 08/09 Audi A4's for sale have racked up over 80k miles. Looking at C63's of the same year, two thirds have done under 70k miles. Over it's life, the average emmissions of the A4 exceeds those of the C63. Regarding wear and tear on the roads, the Audi takes that by a long shot.

goz83

Del2005 wrote: »

They will most definitely be revamping the motor tax system, but it'll only be for increases on diesel and EV. There's no way they'll reduce the pre 08 tax and CO2 emissions will be treated the same, with a penalty for the really bad sh!t that comes out the exhaust. They'll have to start charging motor tax for EV's now or else we'll be completed screwed when they become mainstream, that's if we even own cars by then!

EVs are taxed at €120, which is a farce, because the motor tax system is based on emissions, of which there are none from an EV. No EV tax in the UK.

I was disgusted when I imported my Nissan Leaf from the UK in the middle of last month. I had to pay for the full month of March, even though I only had the car from the middle of the month. Ripped off an entire €5 :pac:

In all seriousness though, I just couldn't justify paying anymore than the 700 odd euro per year I was paying for a 2L car a couple of years ago. It's unjust.

Voodoomelon

If I was buying a high value, semi-exotic second hand car from the UK, there's only one option when it comes selling time. Sell it back into the UK.

Exchange rates will dictate whether its worthwhile or not. If the tax brackets remain as they are for the foreseable future, its best to stick to high performance forced induction vehicles, where high output and high tax aren't the norm.

2015 750i bi-turbo is €750 to tax for example. The brand new stonking 600bhp+ Audi S8 will likely be €1200 as the current model is a hair into the top bracket.

goz83

goz83 wrote: »

EVs are taxed at €120, which is a farce, because the motor tax system is based on emissions, of which there are none from an EV. No EV tax in the UK.

I was disgusted when I imported my Nissan Leaf from the UK in the middle of last month. I had to pay for the full month of March, even though I only had the car from the middle of the month. Ripped off an entire €5 :pac:

In all seriousness though, I just couldn't justify paying anymore than the 700 odd euro per year I was paying for a 2L car a couple of years ago. It's unjust.

They are 100% going to up the tax on the electrics.

Esel

goz83 wrote: »

EVs are taxed at €120, which is a farce, because the motor tax system is based on emissions, of which there are none from an EV.

Generating the electricity to charge an EV causes emissions, so some level of tax is fair, imo.

colm_mcm

€120 a year is hardly a farce when you consider that the gov are doing free charging and grants to artificially make EVs more viable

goz83

Esel wrote: »

Generating the electricity to charge an EV causes emissions, so some level of tax is fair, imo.

That's not an issue with the EV to be fair. The electricity could come from clean, renewable sources. So it's a non argument.

colm_mcm wrote: »

€120 a year is hardly a farce when you consider that the gov are doing free charging and grants to artificially make EVs more viable

It's a farce based on the current system. I've no problem paying 120 tax a year

Voodoomelon

goz83 wrote: »

I've no problem paying 120 tax a year

You know the system's fecked when i'd gladly pay ten times that.

goz83

Voodoomelon wrote: »

You know the system's fecked when i'd gladly pay ten times that.

Amen

Roger Mellie Man on the Telly

goz83 wrote: »

The electricity could come from clean, renewable sources. So it's a non argument.

We all know that most of it doesn't however.

goz83

Roger Mellie Man on the Telly wrote: »

We all know that most of it doesn't however.

More and more does however.

The EV is not producing any emissions. It's not burning petrol, or diesel, which requires energy to extract, refine and transport.

How the grid electricity is generated has very little to do with the driver. Many EV owners choose to, or already have renewable energy tacked onto their property, which can produce more than enough power to charge the EV. I'm currently looking at Solar power myself.

The Rape of Lucretia

marathonic wrote: »

As we all know, and much to the annoyance of anyone with an interest in cars as more than a means to get from A to B, the Irish market is obsessed with motor tax rates and used them as a major influence into what they decide to buy.

Of course, the big cost in car ownership is depreciation. However, the Irish obsession with motor tax rates means that, to a certain extent, depreciation is correlated to the motor tax band within which a car falls.

Thats a bit harsh on the majority of Irish car buyers who are perfectly reasonable in looking for value for money, and not why sure it annoys those who have an interest in cars - they can buy the powerful ones if they wish. There is no obsession with motor tax - as with everything, people do not wish to pay more than they have to for something they dont want badly enough.
So cars that are what people want are going to be in demand even second hand and hold their value. Expensive ones less so.
I am not sure what the mystery is.

marathonic

The Rape of Lucretia wrote: »

marathonic wrote: »

As we all know, and much to the annoyance of anyone with an interest in cars as more than a means to get from A to B, the Irish market is obsessed with motor tax rates and used them as a major influence into what they decide to buy.

Of course, the big cost in car ownership is depreciation. However, the Irish obsession with motor tax rates means that, to a certain extent, depreciation is correlated to the motor tax band within which a car falls.

Thats a bit harsh on the majority of Irish car buyers who are perfectly reasonable in looking for value for money, and not why sure it annoys those who have an interest in cars - they can buy the powerful ones if they wish. There is no obsession with motor tax - as with everything, people do not wish to pay more than they have to for something they dont want badly enough.
So cars that are what people want are going to be in demand even second hand and hold their value. Expensive ones less so.
I am not sure what the mystery is.

Sorry I likely worded it too strongly. Of course people can buy what they want but the fact of the matter is that the tax system is geared against petrol cars. A lot of people dont drive the miles to make the higher, on average, fuel efficiency of diesel to be a major concern so the unfair tax system leads someone who would typically prefer a more refined petrol car to choose a diesel variant instead.

This isnt just reserved to the arena of performance cars. A lot of people arent buying what they want (a petrol car) due to the influence of an unfair motor tax system.

Fiskar

marathonic wrote: »

Sorry I likely worded it too strongly. Of course people can buy what they want but the fact of the matter is that the tax system is geared against petrol cars. A lot of people dont drive the miles to make the higher, on average, fuel efficiency of diesel to be a major concern so the unfair tax system leads someone who would typically prefer a more refined petrol car to choose a diesel variant instead.

This isnt just reserved to the arena of performance cars. A lot of people arent buying what they want (a petrol car) due to the influence of an unfair motor tax system.

Its not just tax, petrol prices are out of skew too. Most countries petrol is cheaper. Was a brief period diesel here was dearer than petrol until vested interests reversed that and now we have an 11 to 15 cent difference. It does add up per mile.

goz83

I was in the Skoda garage with my old man a coup,e of months ago. I was standing beside an Octavia that a couple in their 50's were looking at. THe sales man was talking about the car. The man was listening, but the woman had that "I have a question" look on her face. Mid sentence, the woman interrupted the sales man with "and does it come with the cheap tax"

Sales men in several garages in recent months tried pointing me and my Dad to Diesel variants, even though they were told that we only do small miles. Most of them said that the tax on the diesel is less and would save us money.

It seems the cheap tax is on everyones mind. I prefer to buy a car suited to my driving needs and if cheap tax comes as part of that deal, then I will have it. It won't make my decision for me however.