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Budget forces finance rethink

Finance companies and carmakers are rethinking PCP and special offers as they calculate the impact of Gordon Brown’s Budget.

CAP, EurotaxGlass’s and other specialists are looking beneath the headline-grabbing ‘gas guzzler tax’, and trying to assess whether the chancellor’s proposals will change buying patterns.

In a tough market, consumer incentives such as free or cheap loans are linked to a select group of models and derivatives.

The skill comes from working out where the carmakers’ investment in special deals will have the maximum effect.

Though the differences between most car tax bands are small, they are thought to have an increasing influence on private motorists. That is because the impact of carbon dioxide emissions on global warming has now become a major political debate.

Adrian Rushmore, managing editor of EutotaxGlass’s, believes some fleet managers will want to lower costs by reducing the number of band G cars.

“Large-engined executive saloons will normally lose their value more quickly than their smaller-engined equivalents,” he says.

“The expectation is that the VED rate for top band vehicles will continue to rise beyond 2008, so private buyers will be increasingly hesitant about buying the heaviest polluters.”

Manufacturers are wondering whether to increase further the emphasis on economical cars. A major issue for carmakers devising PCP packages is residual values, which will change if Budget proposals change the choice of models.

CAP says the new road-tax (VED – vehicle excise duty) band G charge (cars emitting 225g/km or more) of £300 a year (rising to £400 in April 2008) will affect few car users. More significant is the alignment of petrol vehicle excise duties, which were generally £10 less than for diesel – until the Budget.

Millions of car owners now face an increase well above inflation, which is likely to become another reason to delay changing cars.

Makers of 4x4s and large road cars are devising aggressive finance deals for Q2 because VED charges will be almost doubled in two years.

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