Cars are the Chancellor”s cash cows, says new report

24 May 2001 #SMMT News

A new report published by SMMT shows that a car generates more

than five times its showroom price during its life. Called Who’s Milking

the Motor Car?, the report tracks the financial beneficiaries of a car from

new in 1992 to its end of life in 2000, logging different income streams year

on year.

The findings reveal that the biggest single winner is the

Treasury. The Chancellor takes more than 23 per cent of total income generated.

This comes from VAT on new and used sales, Vehicle Excise Duty (road tax), petrol

tax and insurance premium tax. Exceeding the showroom price by more than £3000,

the report shows the government receives over £11,000 during the car’s nine-year


Other sectors can expect income from the car too. Finance houses

and insurers pool a massive £8,000, 16 per cent of the total. Used car dealers

and private sellers benefit from its re-sale value. Assuming just five changes

of owner, the total income from used sales hits £13,900. There are also less

obvious beneficiaries, including car parks, cross channel ferry operators and

even rail companies.

Commenting on the report, SMMT chief executive Christopher

Macgowan said, ‘We all know the enormous social benefits that the car has brought

to millions of people. What this report shows is that each car has a very real

economic value too, not just for those involved in its manufacture and first

sale, but for all those who depend on its significant life span as a major source

of income.’


Notes to editors

  1. The model used for this report is a standard mid-range

    saloon. The price new is assumed to be £9,400 inc VAT. During its life the

    car travels an average 12,000 miles per year. Fuel consumption is assumed

    to be 33 miles per gallon. The car has six owners from new in 1992 to its

    end of its life in 2000.

  2. In addition to the taxes listed above, since April 1998

    all new car sales have been subject to a £25 first registration fee. In 2000,

    over 2.2 million new cars were sold in the UK generating an additional £55.5m

    for the Treasury.

  3. Ferrystat, the annual ferry review published by IRN research,

    reported that nearly 8.8 million cars were transported on UK ferry routes

    to and from Britain and the Continent, the Republic of Ireland and on British

    domestic routes in 2000.

  4. In 2000, an annual season ticket for Winchester station

    car park cost £403. This car park has 582 spaces which fill to capacity by

    10 am each working day. There are more than 15 commuter towns on the South

    West Trains’ Southampton to Waterloo line. Each has its own car park.

  5. A copy of the full report including model assumptions and

    sources is available (on this web site )

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