Has the VAT rise affected sales?

It has been two months since the rise in VAT from 17.5 per cent to 20 per cent. The change was expected to be a setback for car dealerships as the extra cost would see customers avoiding the forecourts.

As we enter March and the new ’11’ registration plates, it is a good time to take stock and see how the rise in VAT has affected car buying trends.

Michael Cole, Managing Director of Kia UK said: “There had been a general expectation that retail customers might be dissuaded from buying new cars because of the increase in VAT – but that didn’t seem to be a factor for us and our dealers. There wasn’t a big rush in December to beat the VAT increase and we didn’t see a fall-off in demand in January.

“Quite the reverse – we saw our retail non-scrappage sales increase from 886 in January 2010 to 1,505 this January – a remarkable volume given the continuing uncertainty in the economy.

"And whilst our overall volume has fallen compared to last year we have still recorded an excellent 2.4 per cent share of the total market, up from 1.9 per cent last January – when you take out the scrappage effect,” he added.

We’ve asked one of our Perrys dealerships to tell us how they have found the first two months of 2011.

Nigel Demaline of Perrys Burnley commented on the strong sales: "We are delighted to be able to offer such inspiring vehicles that are really bucking the trend. The seven year warranty is definitely helping towards to impressive sales figures!"

Much of this success could be because Perrys in Burnley is a Kia dealership. The South Korean manufacturer is enjoying a steady rise in both perception of its cars and the quality and desirability of its latest models.

The likes of the Kia Sportage and Kia Soul have been successes for the brand in 2010 and the start of 2011 has seen the launch of the next generation Kia Picanto city car and the Kia Rio supermini at the Geneva Motor Show prior to both cars entering showrooms in the next year.

This, along with Kia’s impressive seven year warranty on all its cars, has helped the brand, and dealership, enjoy a strong start to the year.

In doing so, it shows that while the VAT rise is not a welcome move for car dealers, the effects on sales may not be as big as first thought.

For more information on any Kia’s in the range or to arrange a test drive pop into the Perrys dealership on Accrington Road, Burnley or call 01282 427 321.