Motoring Guide

The new car tax regime

Alistair Darling's budget last month unveiled nothing short of a new car tax regime for motorists, with higher charges to be levied for the most polluting vehicles in a bid to tackle pollution. So just how far will the new rules affect the UK's 40 million drivers? Under the proposals, categories for vehicle excise duties (VEDs) have been revised so vehicles in Band A – which emit up to 100kg/km of carbon dioxide - will pay no fees while those in Band G – which emit more than 255g/km - will pay £400 in 2009.

In addition to the highest road tax rates, in 2010 a so-called "showroom tax" will be levied on the highest polluting vehicles during their first year of ownership. Cars that emit more than 255 kg/km of carbon dioxide, such as the Range Rover Sport and Ferraris will be subject to the highest charges of up to £950.

However, motorists buying brand new cars in 2010 that emit less than 165g of CO2 per km will get the first year's car tax free of charge.  

Further to increased charges on new vehicles, Mr Darling also introduced unpopular increases in vehicle duty on older cars based on their emissions. This means that drivers of some family cars and people carriers such as the Ford Galaxy and Renault Espace could see their car tax rise to £455 per year by 2010. The new rates will affect almost all cars built between 2001 - 2006.

• Use the official car tax calculator to see how you are affected
• Visit the Directgov site for full details of the new car tax bands

In support of his changes Mr Darling said: "It is right that if people choose to buy a more polluting car that they should pay more in the first year to reflect environmental cost. The changes will provide a real incentive to manufacturers and motorists."

But the measures were refuted by the Conservative party, as the shadow vice-chancellor George Osborne remarked: "Labour came into office promising to help Mondeo man. Now Gordon Brown is hitting Mondeo man and millions of families with new taxes. Labour's economic incompetence means a rising cost of living for the very people they said they would help.

"This is a bad news Budget which kicks Britain's families when they're down. The cost of living is already rising fast and the government has added to it with stealth taxes on cars and alcohol, when we believe that these kinds of taxes should be offset with tax reductions elsewhere."

Although the new car tax rules may appear to restrict motorists hoping to purchase larger vehicles, according to Guardian Money it is still possible to buy a family car or even a 4x4 and escape high charges if a smaller diesel engine is chosen over a petrol one.

Motorists hoping to buy a used car will need to assess carefully how much tax they will be paying on a chosen model in the future.

The news provider claims that the Chancellor dramatically reduced the value of used cars in the higher VED categories.

For example, large petrol-run, automatic MPVs, such as the Volkswagen Sharan, will be unattractive to buyers due to high taxes from 2009. Recent figures verify the appeal of diesel cars among motorists.

The Times reports that statistics published by the Society of Motor Manufacturers and Traders show that sales of diesel cars have increased, accounting for 40.2 per cent of the 2.4 million cars sold in Britain last year, compared with only 13.8 per cent in 1999.

Diesel accounts for a greater share total of fuel consumed by all vehicles in Britain than petrol, with drivers last year buying 25.5 billion litres of diesel and 24 billion litres of petrol.

According to the organisation, sales of diesel-powered cars will outstrip petrol-powered cars, by 2011.

Diesel may cost 5p to10p a litre more than petrol, but it proves more economical for most drivers as it powers 10 to 20 per cent more miles for the same fuel, the news provider reports.

Furthermore, figures released by Experian show that purchases of energy efficient and eco-friendly vehicles are increasing among used car buyers. According to the information services company, sales of used diesel cars rose by four per cent last year while sales of used petrol cars fell by 4.4 per cent.

Greater London saw the highest increase as sales of used diesel cars increased by nine per cent during 2007, followed by five per cent in the south-east.

Used electric and hybrid vehicles have also increased in popularity with sales rising by 473.5 per cent and 71.8 per cent respectively.

"There has been a lot of media attention, not only around the environment and the effect of the most polluting cars, but also on the forthcoming car tax increases and the rise in fuel duty," explained Kirk Fletcher, managing director of Experian's automotive division.

"These latter factors appear to have played a more significant role in consumer buying habits over the last few years," he added.

The worth of government measures to encourage manufacturers to produce more fuel-efficient vehicles and motorist to buy them have been disputed by some industry experts.

Nigel Wonnacott from the Society of Motor Manufacturers and Traders told the Daily Telegraph: "Does he (the chancellor) really think that manufacturers operating on five- to seven-year product lead times are going to completely change direction because of a punitive local sales tax? Not a chance."

The Telegraph also reports the extra VED might make cars in the highest category appear even more lucrative.

"There might be something in that for a small minority. Possibly from the same people who welcomed the £25 congestion charge in London. But on a serious note, this isn't a VED change; it's a sales tax that's been bought in under the cloak of environmentalism."

The chancellor's reform of VED, which will see the treasury net an extra £735 million from motorists has also been received with scepticism by the AA's Edmund King.

"The increase in vehicle excise duty for high-polluting vehicles will catch out many motorists. Drivers want cleaner, greener cars but we must ensure that the proposals are not just a green smokescreen for allowing the Treasury or local authorities to take more cash from the motorist," he said.

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2010: The year of the used car?

The scrappage scheme provided a much needed boost to the automotive industry and enticed thousands of people to buy new vehicles, with the Society of Motor Manufacturers and Traders repeatedly reporting surges in sales.

But now that it is over, are people going to stop buying new vehicles? If independent car advice website honestjohn.co.uk is to believed, the answer is no. The portal recently predicted that 2010 could be the year of the good value used car.

"In 2009, good quality used vehicles were thin on the ground as a direct consequence of the severe downturn in the new car market, fleets holding onto their stock for longer than ever and private buyers putting off changing their cars," commented Dan Harrison, editor of the website.

"The result was a clamour for the remaining stock amongst dealers and huge used car price rises. Great for sellers – but not such good news for buyers," he added.

However, towards the end of the year a better supply of vehicles started coming on to the market via dealerships and auctions as well as private sellers, so prices started to settle down.

"I believe prices will become far more realistic as 2010 progresses and supply matches demand. But the slump in new car sales to fleets over the past 18 months means that there will continue to be a shortage of cars that are six months old or less," Mr Harrison said.

Glass's Guide, often referred to as the used car dealer's "bible", has identified increasing demand for luxury vehicles. Despite the fact that petrol prices are on the rise and high powered cars are often thought of as gas guzzlers, buyers are on the lookout for prestige SUVs, 4x4s and supercars.

The value of a typical used family car has risen by at least two per cent since January, but large 4x4s have registered an increase double this amount. Luxury vehicles and supercars have also followed this upward trend.

Glass's Guide has said that there has not been an adverse reaction to record-breaking petrol prices in the used car market, as there was in the summer of 2008, and put this down to several factors.

"Firstly, there is less of the 'feel-bad' factor that pervaded the economy and the market in the summer of 2008. Back then there was also an added buying disincentive in the shape of the large VED [vehicle excise duty] increases planned for the following April and plentiful used car supply," commented Adrian Rushmore, managing editor of Glass's Guide.

However, he advised motorists to consider fuel prices in their choice of purchase, not only at the time of buying, but also how they are likely to change over the period of ownership.

"Fuel is the second largest cost of vehicle ownership, so there is a strong argument that all used car buyers should give more consideration to pump prices," he commented.

A penny will be added to fuel duty in October and a further 0.76p will be lumped on top of that in January 2011, while a commitment to the fuel duty escalator will see pump price rises rise by inflation, plus 1p a litre each year between 2011 and 2014.

The new government could also bring about rises in prices if VAT is increased and a duty hike is introduced in the first Budget after the election.

Other research from Carmony.co.uk has suggested that there is a variety of used vehicles that are currently sought after in Britain, but the Volkswagen Golf is the most popular.

"The Volkswagen Golf has always been a favourite with the British motorist," confirmed Alan Hazelhurst, managing director of Carmony.co.uk.

Second on the list of the top ten most searched for cars was the Fiat 500, followed by the Ford Focus. Backing up Glass's Guide's report, there were plenty of luxury vehicles and 4x4s in the top ten.

The Jeep Cherokee was fourth, the Audi R8 came in fifth, with the Audi A3 following up in sixth, the Land Rover Freelander was seventh and the Chrysler Voyager took ninth place in the list. The top ten most searched for cars by manufacturer also endorsed Glass's Guide's report. Audi, Mercedes, Porsche and Range Rover all made the list.

It seems that buy practices are also changing, with more people searching on the internet for used cars. The UK's largest online used vehicle retailer, Autoquake.com, recently reported that record numbers of buyers are willing to buy online.

Research by the company found that the number of people who would be happy to consider purchasing over the internet has increased by 14 per cent over the last three years, while conventional places to shop for a used car all became less popular during the same period.

Whether shopping online or via a dealer, it seems that traditional considerations are still important for motorists, despite the scrappage scheme encouraging many more people to buy eco-friendly models.

Research by Carmony.co.uk has found that environmental concerns are low on the priority list for buyers, with just a fifth saying they would consider green credentials when it comes to purchasing their next car.

Price is still the deciding factor, with 84 per cent of respondents to the website's survey citing this as the top consideration. Current mileage, age, reliability of brand and service history all made the top five.

In addition, the mechanical state of the car, the cost of running it, the reliability of the model, how the car runs and the colour all came ahead of environmental concerns, making up the remainder of the top ten.

"Even though the worst of the recession appears to be over, consumers are still looking for the best deal, sacrificing the environment and choosing a car that suits the budget, not the green conscience," commented Alan Hazlehurst.

"It will be fascinating to see if this dynamic continues, as the economy accelerates away from recession. But this research does reinforce the need for cost-efficiency in the environmentally friendly alternatives," he added.

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New green vehicles for 2008

Concerns over the effects of climate change and calls to halt the increase of global warming have rapidly pervaded almost every sector - and none more so than the motor industry. Although the development of an environmentally-friendly vehicle may seem an almost impossible task, last month's Geneva Motor Show displayed just how inventive manufacturers are becoming in their production of 'green' cars.

Volkswagen used the event to showcase its new EcoFuel, a natural gas-fuelled version of the Passat, which combines "the seemingly contradictory virtues of performance and economy" and will be on sale in Europe around the end of the year.

Autobloggreen.com reports that unlike most natural gas-fuelled cars, which tend to be less powerful than their gasoline counterparts, the Passat EcoFuel uses one of Volkswagen's turbocharged direct injected TSI engines, which can be powered by both conventional fuel and compressed natural gas (CNG).

Optimized for running on CNG, the 1.4 litre TSI engine has an output of 150hp, and fuel consumption of 5.2l/100km and is fitted with both a supercharger and a turbocharger.

In order to allow the engine to cope with the additional loading encountered through the burning of natural gas rather than gasoline, changes have been made to the vehicle.

The valves, piston rings and the pistons are all uprated, while the turbocharger has also been replaced with a smaller unit. Controlling the switch between conventional fuel and natural gas is a new engine management computer.

Natural gas is stored in three tanks, with a combined capacity of 22 kg, underneath the floor of the boot and is supplemented by a 31-litre tank for conventional petrol. Between the two tanks the vehicle can cover more than 490 miles.

Ford also used the Geneva Motor Show to display the green credentials of some of it's own products.

"Sustainable mobility imposes a huge challenge for society and the automotive industry, and there is still a long journey ahead of us," said John Fleming, Ford of Europe president and chief executive.

The company claims to be able to provide "technically viable and affordable ways to reduce the burden on the environment without giving up basic needs such as personal mobility".

Ford is currently focusing on a line of low carbon dioxide emitting cars called ECOnetic and bio-ethanol powered Flexifuel vehicles as well as developing a range of affordable new petrol engines under the brand name Ford EcoBoost.

"These use a combination of direct fuel injection and turbocharging technologies to deliver better performance, emissions and economy from smaller displacement engines," Mr Fleming continued. "In addition to our dedicated lines of low-CO2 vehicles, our current standard range of vehicles is highly competitive in terms of CO2, as well. This demonstrates how serious we are in our commitment to reduce continuously the carbon footprint of our cars."

"And this without sacrificing any of the other trademark qualities customers expect from Ford vehicles: style through 'kinetic design'; excellent driving dynamics and dependability throughout the lifetime of the vehicle," he added.

Meanwhile, Motor Trend reports that Hyundai is also seeking to affirm its commitment to green technology with its HED-5. The six-seater, which uses existing technology to reduce carbon dixoide emissions by up to 29 percent – received its world premiere at the Geneva Motor Show. A revived version of Hyundai's European-market MPV, the Matrix was also on display at the event.

Fiat was yet another car maker to join the swelling ranks of environmentally conscious manufacturers at the show.
The company's 500 Aria and Panda Aria models are both low-emissions vehicles that will be exempt from road tax in the UK, Yahoo News reports.

The 500 Aria uses a retuned version of the 500's 1.3-litre turbodiesel engine, producing just 98g/km of carbon dioxide, a new Duologic semi-automatic gearbox and Stop&Start - a device which switches the engine off when the car is at a standstill to reduce pollution.

In addition, Fiat has reduced the weight of the 500 Aria, fitted low rolling resistance tyres and used recycled materials for the inside.

The vehicle will be on sale before the end of 2008, although Fiat has not confirmed prices.

Fiat said emissions will be reduced to just 69g/km for the Panda but added it will take longer to enter the showroom than the 500 Aria, however.

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Checking car insurance before driving abroad

Check your car insurance cover before driving abroad

When it comes to holidays this summer, most Brits are unwilling to give up some form of escape to the sun, even though many will be cutting back.

However, experts believe traditionally popular destinations in Europe such as France, Spain and Greece will still be the destination of choice for many holidaymakers this summer, as people see vacations as a necessary luxury.

A recent survey by holiday company Expedia.co.uk found that 60 per cent of Brits still intend to take their full holiday entitlement this year, even though they are under increasing pressure at work.

Nearly half of those surveyed said that they feel rejuvenated after a break, while a third commented that it increases their productivity when they get back to the office.
 

If you are planning to drive abroad either in your own vehicle or a rental car, then there are various things you need to consider before you head off for a week or two of relaxation so that you do not end up returning more stressed than when you left.

"Don't drive abroad unprepared," the Foreign and Commonwealth Office (FCO) advises.

First of all, you should familiarise yourself with the laws of the country you are visiting when it comes to driving. This can be as simple as checking which side of the road they drive on or the speed limits and units of measurement they use, such as the metric or imperial system.

For example, France operates under the metric system and therefore displays any limits in kilometres, as well as providing different speed guidance for adverse weather.

Another important preparation is to check with your car insurance company that your policy covers you to drive abroad. This should include breakdown recovery and medical expenses incurred as a result of an accident, according to the FCO.

Some countries require an international driving permit, so you will need to investigate whether your destination is one of these and make sure your licence complies with their regulations.

If you are taking your own car, then you should make sure it is fully equipped for long-distance driving. First of all, service your vehicle before you leave the UK, because the last thing you want is to have to try and get repairs done abroad, especially if you are having to deal with someone who does not speak the same language.

The FCO advises drivers to carry a fire extinguisher, first aid kit, tools, spare bulbs and a warning triangle. In the case of some countries this is compulsory, such as France, where you have to have a reflective jacket and warning triangle to use in the event of a breakdown or accident.

You should be in possession of the car's registration document, your driving licence and, of course, passport, as well as your UK motor insurance certificate, breakdown policy and useful contact numbers and emergency helpline details.

Your car must have a GB sticker clearly visible on the back of it, unless the number plate indicates the car's country of origin. Beware though, that this must comply with the Road Vehicles Regulations 2001, which allows drivers to travel within the European Community without the conventional oval sticker if the plate displays the GB letters against the blue European flag within a circle of gold stars.

For those who intend to fly to their chosen destination and then hire a car, the FCO recommends choosing a reputable rental company.

It advises: "The cheapest deal may not always be the best!"

"Insurance cover is often limited to the legal minimum of the country or state you hire in. You could be held personally responsible for any claim for injury or damage over this limit," the FCO adds.

It also recommends asking your tour operator or car insurance provider if you can top up on the minimum offered by the rental company in order to increase your cover. Not only does this mean that you will know exactly what level of protection you have and any fees associated with claiming, but you could also save money, according to the FCO.

If you decide to hire a motorbike or scooter while abroad, the same sort of guidelines apply. Make sure you go with a reliable company and if it is a foreign outfit, check it is licensed to rent out bikes to tourists.

You should make sure that you travel insurance cover you to drive or be a passenger on a motorbike, which means that you need to check the small print and exclusions carefully.

"Travelling by motorcycle, scooter or moped is significantly more dangerous than by car - if you're not accustomed to riding a motorcycle you should not attempt to ride one for the first time abroad on unfamiliar roads," the FCO adds.

In addition, you should make sure that your motor insurance includes third party cover.

Another thing to consider when travelling abroad is the fact that driving styles and customs may be different. For example, flashing your lights could have an alternative meaning.

"Drive defensively and expect the unexpected," the FCO advises.

Do not forget that the drink driving limit often differs in foreign countries, with most European nations having a lower benchmark that Britain.

A recent survey by Holiday-Rentals.co.uk found that Brits are intending to spend almost £300 less on their vacations this year due to the recession, but cutbacks should not include insurance cover.

Graeme Trudgill, technical and corporate affairs executive at the British Insurance Brokers' Association, says: "Travel insurance is as important as a suitcase."

"Don't underestimate it. Always buy it, it is cheap to buy but make sure you are buying the right thing for you," he advises.

"People tend to see it as a commodity attached to their holiday but it is something you've got to rely on.

"If something does go wrong abroad, you want to be able to phone someone who speaks your language who knows how to get someone to help you, [or] get you some medical attention and pay for it," he explains.

The same applies to car insurance cover if you are intending to drive abroad.

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