How does Brexit affect new car sales?

What are the effects of new car sales after Brexit?

In short: a no-deal Brexit is likely to mean that the list price of vehicles may go up by as much as 10%. British government is working with the automotive industry, investigating ways to levy this extra cost but since there is no deal in place (at the time of writing), car prices will increase. For a more detailed look at the current situation, read on.

This question above all others has come up more often in the last couple of years at Charters Citroen of Aldershot. With so many news articles, propaganda and scare-stories of how Brexit may affect the automotive industry, it is difficult to maintain a firm grasp on the most likelihood of outcomes.

With a no-deal Brexit becoming more of a reality, then car prices are likely to increase (by up to as much as 10% due to import tariffs) starting on 29th March 2019.

What can I do to combat this increase?

Any new vehicle not in the country and registered by 28th March 2019 is likely to be eligible for this price increase. Ordering your next new car (if you’re searching for one) before this time is important. With new cars sometimes taking weeks to deliver, the necessity to act fast has become ever more paramount. Both Charters and Citroen UK work hard to keep the costs of new car ownership down but with the upcoming changes, it is possible that this could drastically affect the costs going forward.

Below is an example of how a no-deal Brexit may affect financing a vehicle.

Before Brexit

Based on a £15,000 vehicle (includes £0 import duties). Guaranteed Future Value is the expected price of the vehicle after the contract ends (i.e. After a 36 month contract, a car may be worth £7,000). That’s an example depreciation of £8,000. If you were to get a 0% APR finance agreement on the vehicle, it would cost you 36 equal monthly payments of £222.23 with £0 deposit.

After Brexit

The same £15,000 vehicle may now come with potentially £1500 import duties (totalling £16,500). The vehicle is still worth a Guaranteed Future Value of £7,000. Using the identical finance agreement as above, the equal monthly payments would equate to £263.89 per month. Customers buying a vehicle would pay an extra £41.66 per month.

What happens if the government levies the extra import duty?

This could be a short-term benefit going forward with new car prices initially frozen for customers. However this is unlikely to continue for as long as it is needed. The European Automobile Manufacturers Association claims that up to 11.7% of EU vehicle production gets imported to the UK. Using 2017’s figures, that’s 1.9 million cars per year subject to a 10% levy.

If I buy a car now, will I avoid the extra import duties?

Yes. Provided you buy a vehicle that is in the United Kingdom or can be manufactured or delivered before the cut-off date, then you will avoid any import duties. As with all discussions relating to the subject of Brexit, this information is constantly changing so we urge you to contact Charters Citroen of Aldershot to see how buying your next car sooner (rather than later) may be cheaper in the long run.