As part of the Corona stimulus package, the German government has decided to cut VAT for six months. Car buyers will also benefit from this, as the car VAT will also be reduced. But what exactly does it mean for drivers and buyers??
First of all, the VAT reduction applies to all new cars purchased in the period from 1. July to 31. December 2020 will be purchased. Instead of the previous rate of 19 percent, a reduced tax rate of 16 percent will be applied to cars. This means that the purchase price of a new car can be reduced by up to three percent.
But it’s not just buyers of new cars who benefit from the car VAT cut. There are also savings on company cars. Because the reduction in tax is also applied to the leasing rates. This leads to a noticeable reduction in running costs for the company and thus also for the employee.
Car VAT cut: What’s behind it all?
The car VAT reduction is part of the German government’s economic stimulus package. From the 1. July 2020 until 31. December 2020, the VAT on cars will be reduced from 19% to 16. The aim of the measure is to stimulate the economy and strengthen the automotive market. But who actually benefits from the car VAT cut?
Basically, everyone who wants to buy a new car in the next few months will benefit. This is because the reduction in VAT also lowers the selling price, as the tax component makes up part of the selling price. However, those who want to buy a more expensive car will particularly benefit. This is because the higher the price, the higher the tax rate. A reduction of 3% for a car for 10.000 €, for example, is significantly lower than for a car for 50.000 €.
But buyers are not the only ones to benefit from the auto VAT cut. The car industry can also benefit from the measure, as lower prices can increase demand. This can lead to more cars being sold and therefore more jobs being retained in the industry.
- Conclusion: The car VAT cut is a measure by the German government to boost the economy and strengthen the automotive market. This will primarily benefit buyers who plan to purchase a new car in the coming months. But the automotive industry can also benefit from the measure.
How much drivers can save with the cut?
The recent decision to cut VAT on cars by 3 percentage points is expected to boost car purchases in Germany and strengthen the economy. But how much can motorists actually save as a result of the reduction?
Savings depend on a number of factors, such as the purchase price of the car and the amount of VAT previously paid. According to experts, consumers can save on a purchase price of 20.000 euros, a saving of around 500 euros could be achieved. If the purchase price is higher, such as 30.000 euros, it can be as much as 750 euros.
However, it should be noted that the reduction in VAT only applies until the end of 2020. After that, tax rates will return to the original level. This means that drivers planning a purchase in the near future should take advantage of the tax cut before it expires.
- Not only new car buyers, but also used car buyers can benefit from the tax cut.
- It remains to be seen whether the reduction in VAT will actually have the desired effect on car sales.
Overall, motorists may see savings from the reduction in VAT on cars in the coming months. However, it should be noted that the tax cut is limited and will not work miracles. Drivers should therefore not be influenced by the reduction in VAT alone, but should also take other factors into account in their purchase decision, such as the price of the vehicle, equipment and environmental compatibility.
Which cars are particularly affected by the reduction?
Drivers can benefit from lower prices as a result of the recently enacted reduction in value-added tax as part of the economic stimulus package. However, not all vehicle types are equally affected by the reduction measure.
A particularly strong impact on price is likely to be seen for new cars. Here, the reduction in VAT may well amount to a five-digit sum, depending on the vehicle model and purchase price.
The reduction in VAT could also lead to noticeable price reductions for e-cars and hybrid vehicles. Since these types of vehicles are often still more expensive than comparable models with internal combustion engines, the reduction in VAT could provide an incentive for drivers to switch to more environmentally friendly variants.
Depending on the manufacturer and model, however, certain vehicles could also barely benefit from the reduction in VAT. Here it depends on the pricing policy of the manufacturers and how much prices had already increased before the measure.
- likely to be affected by the VAT cut:
- New car
- E-cars and hybrid vehicles
In summary, the reduction in value-added tax can help motorists achieve more favorable prices overall. Savings are expected to be particularly significant for new cars and environmentally friendly vehicles. However, the concrete effect on the price can vary depending on the manufacturer and model.
The measures for motorists in the stimulus package
The federal government’s economic stimulus package brings relief and savings for many drivers. One of the essential measures is the temporary reduction of the value added tax on vehicles.
This measure is intended to provide up to 31. December 2020 and applies to all new car purchases as well as vehicles registered by the end of the year. This results in savings of several hundred euros for many drivers.
In addition, the federal government has decided to reduce the vehicle tax for particularly environmentally friendly vehicles. Owners of electric cars and plug-in hybrids will be relieved and can expect a reduction in their tax bill.
- The economic stimulus package also includes many other measures for motorists, such as:
- An additional support program for the expansion of the charging infrastructure for electric cars
- The expansion of tax incentives for company cars with electric and plug-in hybrid drive systems
- An increase in purchase premiums for electric cars to further promote electromobility
These measures are designed to give drivers more incentives to buy environmentally friendly vehicles in the future, while at the same time providing financial relief by reducing VAT on new car purchases and vehicle tax for more environmentally friendly vehicles.