How Is the SIV Calculated on a Vehicle Stock Record?

The Stand-in-Value (SIV) on a vehicle stock record represents the lowest price at which a vehicle can be sold without incurring a loss. This calculation considers all costs associated with the vehicle, including purchase price and preparation costs, and accounts for VAT implications under the margin scheme.

Key Concepts of SIV Calculation

• SIV Purpose:
  • The SIV ensures that selling the vehicle at or above this value results in no financial loss for the dealership.
• Accounting vs. Margin VAT:
  • While the SIV includes preparation and other costs incurred after purchase, these costs do not directly reduce profit for margin VAT purposes.
  • The SIV calculation ensures that VAT liabilities are accounted for to prevent unintended losses.

Example Scenario

1. Initial Purchase:
   • A vehicle is part-exchanged at a purchase price of £1,000.
2. Preparation Costs:
   • Extensive repairs and preparation work are carried out, adding £2,423.15 in costs.
   • Additional minor costs bring the total preparation costs to £2,502.85.

Breakdown of SIV Calculation

Logical Expectation:

• Selling the vehicle for £3,502.85 (the total cost incurred) should result in breaking even.

VAT Implications

• Under the margin scheme, VAT is calculated based on the profit margin:
  • Profit for VAT Purposes: £3,502.85 - £1,000.00 = £2,502.85.
  • VAT Liability: 20% of £2,502.85 = £500.56.
• If the vehicle is sold for £3,502.85, the dealership retains only £3,002.29 after VAT, resulting in a loss.

Adjusted SIV to Avoid Loss

• To avoid a loss, the SIV is adjusted to £4,003.41, ensuring:
  • A margin VAT liability of £500.56.
  • Net retained value matches the total costs incurred, resulting in no profit or loss.

Special Note for Qualifying Vehicles

• For qualifying vehicles, the SIV includes VAT as part of the calculation.

Key Takeaways

• Practical SIV: The SIV displayed in Navigator accounts for VAT liabilities and ensures the dealership does not lose money on the sale.
• Margin Scheme Complexity: Selling at the apparent cost of the vehicle may still result in a loss due to VAT implications.
• Adjustments for Loss Prevention: The SIV ensures all costs, including VAT liabilities, are covered.