With the VAT hike set to come into force in less than three weeks time, if you're planning any big purchases - now's the time to make them!
Here at lovemoney.com, we don’t usually encourage you to go out and get spending on high priced items – but now is the exception!
The government’s putting up VAT from 17.5% to 20% on 4th January 2011. That means most of the things we buy are about to jump in price by 2.5% - and the more expensive the purchase, the more it will cost you.
Buy it now!
Figures from Sainsbury’s Finance show that around one in four people have planned to push forward a combined total of £53 billion of purchases in order to avoid an extra £1 billion of VAT charges.
Take a look at this table showing some of the most common pre-VAT hike purchases...
|
Product |
Price now |
Price from 4th Jan 2011 |
Increase |
|
Samsung 32” LCD TV |
£349.99 |
£357.44 |
£7.45 |
|
17” Apple MacBook Pro |
£1,899 |
£1,939.40 |
£40.40 |
|
Josef Leather Corner Sofa |
£2,995 |
£3,058.72 |
£63.72 |
|
Deluxe fitted kitchen |
£6,995 |
£7,143.83 |
£148.83 |
|
Peugeot 207 5 door |
£9,710 |
£9,916.60 |
£206.60 |
As you can see, shell out ten grand for a new car and you’ll be paying over £200 extra in VAT come January 4th. In fact, many car dealers are actually using the VAT hike as a promotional tool and offering to pay the extra 2.5% if you place an order soon.
John Fitzsimons looks at a brilliant new credit card which is a must-have for drivers.
If your local dealer has no such promotion in place it’s still worth trying to haggle over the amount of VAT you'll pay – especially if you can guarantee them a quick sale.
It’s also worth taking a look at Rachel Wait’s article The 10 cheapest cities for buying a car as if you buy a used car privately, you won’t pay any VAT.
Even if you’re not planning on changing your car anytime soon it’s still a good idea to have it serviced and make any pricey replacements such as new tyres before the VAT rise comes in.
But what can you do if you haven’t got a spare grand or ten knocking about to pay for a new fitted kitchen or car? Well if you’re 100% sure that you need and can afford to make a high price purchase and you want to avoid the VAT rises, a loan could be a good option.
Loans
I really want to emphasise that you shouldn’t even be considering a loan if you’re not completely positive that you can pay off whatever you borrow. It’s really not worth putting yourself in a whole load of debt unless you know you can clear it and you’re certain that the intended purchase is an absolutely necessity.
Right, lecture over! Here’s a table showing the five best deals available for a £10,000 unsecured loan to be paid back over five years.
|
Provider & Product |
Typical APR |
Total amount repayable (TAR) |
Monthly repayments |
|
7.5% |
£11,952.60 |
£199.21 |
|
|
7.8% |
£12,032.40 |
£200.54 |
|
|
7.8% |
£12,032.40 |
£200.54 |
|
|
7.9% |
£12,059.40 |
£200.99 |
|
|
7.9% |
£12,059.40 |
£200.99 |
As you can see, you’ll be paying back an extra two grand if you take out a £10,000 loan and clear it in the set five year period.
Now, these are all unsecured loans – so you won’t have to offer up your house or car as a guarantee against the debt. But it is worth noting that the APR is typical – so if you have a sketchy credit record you’ll probably have to pay more in interest.
You can get a personal quote for a loan by heading over to our loan comparison centre and to find out more about sensible borrowing read Six top tips for an affordable loan.
Smaller spends
But what can you do if you’re planning a smaller purchase? It seems silly to take out a loan for a couple of grand.
In fact, the Sainsbury’s finance stats show that the average pre-VAT hike purchase will be £3,426.
For smaller spends like this, it may make more sense to use a 0% purchase credit card. The Tesco Clubcard credit card is currently offering a 0% rate on purchases for a whopping 13 months – and you’ll earn Clubcard points as you spend!
Here’s a rundown of the best 0% purchase cards.
|
Credit card |
0% interest period on purchases |
Typical APR (variable) |
|
13 months |
16.9% |
|
|
12 months |
15.9% |
|
|
12 months |
18.9% |
|
|
12 months |
18.9% |
|
|
Halifax (existing customers only) |
12 months |
15.9% |
|
Bank of Scotland (existing customers only) |
12 months |
15.9% |
If you are planning on taking out a credit card to pay for your pre-VAT hike purchases, make sure you can clear the balance within the 0% period or you’ll be hit with a whopping interest rate come 2012.
But if the unthinkable does happen, and you can’t shift the debt within the 0% period – it’s not the end of the world. You can take out a 0% balance transfer card and become a rate tart! Find out how by reading The 16 month 0% credit card showdown.
A low rate card like the Barclaycard Simplicity is another alternative to a loan if you’re not confident that you’ll be able to pay off your 0% purchase debt within a year. To find out more about this card read The sensible credit card in a world of tarts.
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