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trading in your motorhome ( confused )

1947 Views 2 Replies 3 Participants Last post by  dodger148
does anybody know the reason for dealers to adjust pricing when agreeing trade in? I've just traded in my old van for newer one..we agreed on £22500 trade in ....the new one is £29950..but on the paper work the dealer adjusts the figure as so... purchase price inc write down of £3500.. =£26500...allowance on tradein £19000. balnce £6670..i'm confused! it works out the same..but is a tax loop hole or what? this is the second dealer thats done this. I'm sure it s all proper but why? be interested to know...many thanks...Nick H :roll:
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I suspect it is a VAt fiddle.
If someone is VAT registered they will charge VAT on a sale and have to hand it all over to Customs and Excise, less any VAT on relevant purchases, to put it crudely. If they are "buying" from you unless you are VAT registered and the van legally falls under this, there is no VAT for him to reclaim on the purchase. Therefore, by "lowering" the purchase price he is paying VAT over on £26,500 instead of £29,950.
The figures work out like this....
First scenario, purchase price less VAT - which is what the dealer is getting - is £25,489.36 (add 17.5% should come back to £29,950) on a trade in of £22,500, he makes £2,989.36.
On the revised deal, the dealer is getting £22,553.19 after vat is paid over and against a trade in of £19,000, he makes £3,553.19.

Simple, really.....

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