An analysis of UK vehicle sales data by Clean Green Cars found that luxury car buyers in 2007 are choosing models with higher CO2 outputs than in 2006. The report concludes that the shift is a result of the structure of the existing CO2 road-tax bands.
The problem is that the top road-tax band (Band G), is set at 225 g/km. However, the actual CO2 output of cars on sale in the UK ranges up to 450 g/km, so the top band is only half way up the CO2 scale (99.8% of cars sold in the UK fall between 100g/km and 450 g/km).
While the new Band G is reducing the number of cars emitting just over 225 g/km, it is doing nothing to discourage sales of cars emitting over 275 g/km, whose sales are actually going up. It seems perverse that a family that wants to buy a Renault Espace 2.0T Auto (234 g/km) pays the same tax as a Ferrari F430 owner (420 g/km).
The report author suggests establishing a new Band H set at 275 g/km, costing around £500 per year to provide an incentive to luxury car buyers to choose the less polluting alternative. Forty-five percent of cars over £40,000 fall between 225 g/km and 275 g/km.
While the extra cost of the road tax would not be significant, the impact on resale values certainly would be. Given that the loss in value of a car just over the Band G threshold is around £1,500 more than an equivalent car in Band F (e.g. a 2004 Mondeo 2.5 V6 compared to a Mondeo 2.0), the loss for a Band H car compared to a Band G car would be over £2,000. That would be enough to make even luxury car buyers think twice.