Germans Spending VAT Savings on New Cars

Car buying in Germany showed this year's smallest monthly drop in July as buyers took advantage of the temporary cut in value-added tax (VAT). As you remember from our previous newsletter: the German government cut VAT to 16% from 19% July to December 2020 as part of a stimulus package to boost spending.

"Particularly in the first half of the month, private customers apparently made up for postponed car purchases in order to benefit from the lower value-added tax," said Reinhard Zirpel, president of the Association of International Motor Vehicle Manufacturers, VDIK.

Federal Motor Transport Authority showed that car registration fell by only 5.4% in July, improving significantly in comparison to drops of 32% in June, 50% in May, and 61% in April (due to the pandemic). It looks like the stimulus worked – at least for car purchases!

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