Despite VRT, big savings can be made by importing cars from Northern Ireland, writes Paddy Comyn
As we reported in this supplement earlier this month, while sales of new cars continue to rise, a cause for worry within the Irish motor industry is the increased number of imported vehicles arriving on our shores.
Imports are up 54 per cent in the first three months of the year, compared to the same period two years ago.
Irish consumers, as well as some dealers are, it seems, crossing the border or indeed heading to Britain in the hope of saving money on their purchase, primarily of used cars. With up to 80,000 vehicles likely to be imported into the state in 2007, there must, it seems, be good reason for all of this activity.
With that in mind, we set ourselves a little challenge. We chose a handful of the more popular cars in Ireland, taking a mix from family hatchbacks to executive cars and people carriers, and compared the cost of importing the car or buying it here. We concentrated on three-year-old cars, that were all from main dealers, and the specifications of the cars had to be as close as possible. And we added one more condition: all of the cars we were sourcing from the UK had to be based in Northern Ireland. This would cut down on the price of a plane or ferry journey.
Our tools for the task were simple. We used a popular UK car website to source the cars from Northern Ireland, the Revenue Commissioner's VRT website to check the cost of importing the car into the State and another popular Irish car sales website to source a corresponding Irish registered vehicle. The final price comparisons were for the cars landed in Ireland with all the duties paid in full. The results, if not all that surprising, explain a lot about the reasons for the growth in imports.
Currently, when importing a used car into the state, the Revenue Commissioners calculate the VRT as a percentage of the Open Market Selling Price (OMSP) - this is the price that the car would be expected to sell for on the Irish market. But with cars in the UK having VAT at a lower rate and no VRT charged on them, even with the VRT paid in full, many used cars can be purchased for quite a significant amount less than they can here.
First up was the Toyota Avensis. A car that has become the staple diet of many an Irish family for years, their present model is an excellent car but one that buyers in the UK have largely ignored.
This means that there is not a huge demand for them on the used market and so, by travelling to Antrim, we were able to source a 2004 1.8-litre Avensis that was 34 per cent or €7,238, cheaper than a virtually identical car in Galway.
The Ford Focus, another top seller in Ireland, has also been a top seller in the North and as a result, they are plentiful. In theory we saved €3,013 on a 2004 1.6 LX model compared to a similar car on sale in Co Kerry.
Executive cars are one of the most popular imports from the UK and it is not difficult to see why. We saved €10,433 on a 2004 Mercedes E220 CDI Classic and €4,126 on a 2004 Audi A4 1.9 TDI. The same was true of the two BMW cars we investigated, with a 15 per cent or €5,504, saving on a 2004 BMW 320d Sport and a 6.5 per cent or €3,261 saving on a BMW 530D SE. While these savings are considerable on executive cars, the same can be true for even more humble family vehicles. A family looking for a safe people carrier could save €4,521 or 25 per cent, on a 2004 Renault Scenic 1.4 just by buying in Antrim instead of in Dublin.
Obviously this rampant importation will not be without its problems. Already the used car market is starting to bulge at the seams, with dealers also jumping on the importation bandwagon. Browsing through some of Ireland's main car sales websites, it seems that many dealers now have imported cars on their forecourts - the giveaway clue being that the registration number just shows the year rather than the full plate.
But with so many cheaper used cars flooding the market, the result of this will be that the value of existing used cars will soften significantly. So the new car that you bought this year might be worth quite a lot less in three years time than it might have done. This is because someone, generally, will not buy your used car for up to 30 per cent more than if they travel a mere 100km north of Dublin. And we can't blame the Irish dealers or importers either. The price of their used cars is not inflated because of them, but because of the taxes that had to be paid on the car in the first place.
Currently and despite repeated calls for it, there is no refund scheme for exported used vehicles which would allow dealers and private car owners to claim back the residual value of VRT on a car when it is exported, thus bringing the asking price of the car in line with its market value in the UK - the largest market for used Irish cars outside of Ireland.
The situation, as its stands, makes the price of exported Irish cars uncompetitive, as the residual VRT adds as much as 30 per cent extra to the value of a used car. There have been calls from many motoring lobby groups and indeed Irish representatives of manufacturers for a complete revision of the VRT system as it stands.
While we do know that there will be a revision of the system to take into account CO2 levels, what this is likely to do is force owners of larger vehicles to pay even more VRT on their vehicles, with only buyers of small, low-capacity vehicles paying a new, lower rate of VRT.
Until such time as Irish consumers see some more parity in the price they have to pay for used cars, the importation trend is set to continue unabated, with increased access to information through the internet, travel through cheap flights and ferries and the relative ease of the importation process.
Bear in mind that this small survey of prices concentrated on the North, but prices of cars in many of the large British car supermarkets are significantly lower and most of these outlets are experienced in dealing with Irish buyers and many will operate collection services from adjacent airports.
Whether the Irish motor industry - or indeed the Government - like it or not, until the situation changes, the Irish consumer will continue to vote with their feet and travel elsewhere to find their car bargains.