As you are no doubt aware a VAT increase went through on January 4 2011.

Whilst there haven’t been any major complaints over this rise – most people are aware it’s a necessity to ensure the continued development of the UK’s economy – it doesn’t make it any easier if you’re looking to make a big purchase that will have VAT added to it, such as a new car.

Due to this, many people are trying to get their larger purchases out of the way and done before Christmas, so that they can rest assured they’ll be paying the cheapest amount possible.

But is it actually necessary to be going out to buy, for example, a car before VAT increases?

The simple answer is that it depends on your individual circumstances.

Let’s imagine that you were planning on buying a Volkswagen Golf this year. Prior to the VAT increase, it would have cost you 36,426 pounds if you were to want one from new.

With an increase in VAT you can now expect to pay almost 800 pounds more, as that 2.5 percent rise equates to 775 pounds extra on the cost of a new Volkswagen Golf.

However, if you own a business and use a car for your work as well as for personal use, when you buy the car generally doesn’t have a major effect on its price, as as long as you’re VAT registered, you can claim back 50 percent of the VAT if you use car leasing.

However, if you are not a business what you also have to remember is that whilst the extra VAT might make a car price increase by several hundreds of pounds, should you use some type of car finance deal to buy it, such as car loans, you aren’t likely to see any substantial increase in the amount you’re paying out for car loans on a monthly basis.

Whether you should buy your car now before VAT rises or not really is up to you as an individual and is dependent upon your circumstances. Yes, you can guarantee that you’ll save on the extra costs if you buy now, but it isn’t the be all and end all if you can’t manage to – there are options available to ensure you don’t pay a substantial amount extra come 4 January 2011.