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Britain: there is no purchase tax to add, and car tax is not one

British buyers arrive at a car loan calculator expecting a tax box, because most of them were written for the United States. There is nothing to put in it. VAT at 20% is already inside the advertised price of a car in Britain, so the price on the windscreen is the price you finance, and the field is absent on this page rather than sitting at zero.

The phrase "car tax" causes the rest of the confusion. Vehicle Excise Duty is an annual charge, not a purchase tax: it is a cost of keeping the car on the road, not part of what you borrow to buy it. The first-year rate is collected with the registration and is small against the price, so it belongs in the fees field only if the dealer is financing it.

One consequence of a tax-inclusive price is worth being clear about. A trade-in reduces what you borrow, pound for pound of its equity, but it cannot reduce a tax that was never itemised separately, there is no British equivalent of the American trade-in tax credit, so the saving is the loan interest you avoid and nothing more.

For how the calculation works, the formula behind it and what it leaves out, see the full guide.

Data sources

  • United Kingdom consumer finance conventions

    Effective 2026-08-01 onward · retrieved 2026-08-30

    The State Pension age began rising from 66 to 67 in 2026.

    How we checked these figures

    CONC 6.7.5 sets the minimum repayment floor at interest plus charges plus 1% of the principal.

    Current

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