Some drivers may be surprised by price increases in store for next year, according to one expert.

Although the price of Vauxhall, Ford spares, or any other car manufacturer’s costs can go up on a yearly basis – the seasonal adjustment can add an extra £500 onto the cost of a new motor – while this year the VAT increase is due too.

Dan Harrison, editor of Honestjohn.co.uk, said: "Many people think that once VAT has been paid on a new car, that’s it. No more VAT apart from the VAT on the dealer’s profit."

The editor gave the example of a new vehicle being bought for business use, so it is hired and the VAT can be reclaimed by the person who buys it.

When the motor is sold again into trade, the dealer itemises the VAT who then purchases the vehicle for stock and reclaims the VAT – something which cannot be done for private transactions.

Private buyers, Mr Harrison explains, cannot recoup the VAT and so are likely to feel the effects of the VAT returning to 17.5 per cent on January 1st next year.

If you think you need to find out more about VAT and how it affects you, visit the government website.

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