What effect will Brexit have on car prices?

A no-deal Brexit could mean an increase in car prices in the UK.

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Is now the time to buy?

With potential for a no-deal Brexit outcome, car prices are at risk of increasing in the UK after the transition period on 31st December. Because of this, car buyers are being strongly advised to complete their purchases before the potential price rises in 2021, which will guarantee they are not paying more than they currently would for a new vehicle.

Concerns around car prices after a no-deal Brexit have risen due to the additional costs there would be in manufacturing and importing cars under these circumstances. Manufactures may have no choice but to increase retail prices to compensate for increased costs, and some have already announced their plans in the event that the UK leaves the EU without a deal.

New cars

How much more could a car cost?

One of the key factors that may play a part in price increases as a result of a no-deal Brexit is import tariffs. Due to EU trade rules, the UK currently has no tariff charges on cars imported from the EU, but if the UK leaves without a trade agreement, in line with World Trade Organization (WTO) rules, a 10% tariff will apply to new cars imported from the EU. With around 70% of UK registered cars currently imported from the EU, this will affect the majority of manufacturers.

According to the Society of Motor Manufacturers and Traders, this would lead to an average price increase of 6.3% to car buyers if manufacturers passed on the full 10% import tariff. This is because import charges are priced on the customs price of a car at the time of import, rather than the final retail price.

The table below demonstrates some examples of the potential change in prices if a 6.3% price increase was applied from a manufacturer.

Model Current price Price with WTO tariff applied Price increase
Audi A1£19,495£20,723.19£1,228.19
BMW 3 Series£31,590£33,580.17£1,990.17
Mercedes-Benz A-Class£24,095£25,612.99£1,517.99
Volkswagen Polo£17,125£18,203.88£1,078.88
Volvo XC90£54,400£57,827.20£3,427.20
  • *The ‘current price’ is the latest on-the-road price of the entry-level model for each car, provided on the manufacturers’ websites. Correct at time of publishing (November 2020).


What have car manufacturers said on the issue?

There has been plenty of discussion from brands regarding a no-deal Brexit. Some brands, such as BMW and MINI as well as Jaguar and Land Rover, have confirmed that they’re working on contingency plans but it is too early to give full details. Some have commented on what they’re hoping to do however, with examples below.

Toyota & Lexus

Toyota and Lexus have both confirmed that they will be offering price protection for all customers who have ordered vehicles prior to a no-deal Brexit, including any other changes to market conditions.

This is great news for Toyota and Lexus buyers, as they can purchase with confidence and have no worry of their bill being higher than they agreed.

Mercedes-Benz

According to Which.co.uk, Mercedes-Benz has stated that its car prices will increase in line with the introduction of tariffs at the end of the Brexit transition period. The German automotive manufacturer also states to have contingency plans in place to help manage ‘all relevant topics’, including potential disruption to the movement of goods, customs procedures and logistics.

Audi, SEAT, ŠKODA and Volkswagen

According to Which.co.uk, Volkswagen and its sister brands (Audi, SEAT and ŠKODA) say they ‘may need to adjust car prices to reflect any imposed new vehicle import tariffs or in line with market conditions’. This is no surprise considering every one of these brands would face the 10% tariff increase and import thousands of cars to the UK every year.

Honda

Which.co.uk also confirms that Honda is offering price protection, saying: “Honda has confirmed that ‘when a customer orders a Honda car, the price is protected and it doesn’t matter if the car is in the country. We always price protect at point of order’.”

As Honda is not based primarily in the UK or EU and imports lots of its models from Japan and the US, the company already pays the usual 10% World Trade Organization tariffs, hence why the tariff increase will not affect the prices of new Honda cars in the UK.

However, Honda has confirmed that the new border controls could make importing cars and parts ‘more challenging, time consuming and costly’, and have warned that because of this there ‘could potentially be an impact on our pricing’.


When should I purchase a car?

To ensure that you do not experience a price increase when purchasing your next car, we would strongly suggest moving your next purchase forward and placing your order as soon as possible. This is the only way of ensuring you do not get stung by higher prices and also means there’s less chance of delays in receiving your shiny new car due to complications with importing and sourcing the vehicle.

Purchasing from brands with a price promise, such as Toyota and Lexus, is risk-free as long as you complete the purchase of the vehicle before December 31st 2020.

It’s important to remember that this is all only relevant in the result of a no-deal Brexit. If a trade agreement is met between the UK and EU, then car prices are less likely to increase.

Read more: which.co.uk/car-prices-after-brexit


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