You’ll notice some new car prices creeping up over the coming months as car companies come to terms with the new emissions rating system. The impact on some new car prices will be significant as the Irish Vehicle Registration Tax (VRT) system, as well as the annual road tax system, is based on the emissions rating of each car.

You will hear the term WLTP mentioned in dealerships across the country as car sales people will try to explain why new car prices show such significant increases. In the end, the consumer pays, as always.

WLTP stands for Worldwide harmonised Light duty vehicle Test Procedure, which came into effect in September 2018 across Europe.

This replaces the old New European Driving Cycle (NEDC) test. The official NEDC figures are shown in coloured bands on the windows of cars in dealerships to indicate how much fuel the car uses and its CO2 emissions rating.

This CO2 figure is used to calculate the VRT due on the new car as well as the annual car tax amount.

Stringent

The new WLTP is a more stringent test. It aims to provide fuel economy figures that seem closer to the reality of everyday driving compared with the old NEDC figures that were based on laboratory tests. Fuel economy data is closely linked to CO2 ratings, so it is expected that CO2 figures for some new cars under the new WLTP test will increase.

Car companies knew where the loopholes were in the old NEDC test so much so that the gap between the official test figures and the actual fuel consumption started to widen. With test cars we have seen this be as much as a 40% difference between the official and the actual fuel consumption figure.

The WLTP test could increase official CO2 emissions by more than 20% depending on the car model. Cars with higher CO2 ratings under the new test will suffer significant price increases because of taxation increases under our CO2-based VRT and road tax system. As cars move up into the next higher VRT and road tax bands, the taxation will be higher, pushing prices upwards. Larger SUVs are more likely to increase most in price.

From a new car buyer’s point of view, the chink of good news is that up to September 2019, carmakers are being given a few exemptions to sell off existing stocks of vehicles that are not being re-tested under WLTP. There may be some bargains out there in the meantime.

Where the CO2 figures show minor upward changes, some car companies may absorb the tax increases and retain car prices unchanged. Others may use the introduction of new models and extra specification levels to mask the price increases.

Budget

In the absence of any changes in the VRT system in the recent budget, many car companies are using what’s called an NEDC Correlated figure to establish a CO2 rating for vehicle taxation purposes. This is a combination of the old NEDC and the new WLTP. This change is expected to lead to a rise in CO2 figures for most models of about 6%.

The Revenue Commissioners, who are responsible for the VRT, the most expensive part of a new car price, are using the NEDC Correlated figures for the VRT system. It appears they can continue to do so until 2020, when the full effect of prices increases due to the use of the WLTP figures must be introduced.