Brexit - what does the EU referendum result mean for car buyers?

On 23 June 2016, more than 30 million voters made the historic decision for the UK to leave the European Union (EU), which it has been a part of in one form or another since 1973.

The final polls showed that 51.9% of the public voted to leave, versus 48.1% who voted to remain.

The formal process of leaving the EU started in October 2016, and the UK will leave on 29 March 2019 unless MPs vote to delay or cancel Brexit. 

So, what will Brexit mean for car buyers?

New and used car prices

Car prices were not affected in the first six months after Brexit, because manufacturers had already committed to sales projections – and the incentives they needed to offer to hit them – until the end of 2016.

However, the fall in the value of the pound since the Brexit vote has had an impact on the incentives that manufacturers have been able to offer their customers. When the pound was strong pre-Brexit, European car manufacturers had a larger margin to offer incentives and still make good profit, but the weaker pound negates that benefit.

Discounts on new cars have decreased over the past couple of years. However, this isn’t only due to Brexit; it was also driven during the last six months of 2018 by shortages of cars in showrooms due to the introduction of the new Worldwide Light Harmonised Light Vehicle (WLTP) fuel economy testing regulations, which held up production of some popular models. 

At the end of 2018, discounts were at a 12-month low of 22%. Remember to keep an eye on What Car?’s Target Price discounts to find out about the best savings.

Analysis by the Society of Motor Manufacturers and Traders (SMMT) suggests that EU tariffs on cars could add at least £2.7 billion a year to imports and £1.8 billion to exports. It states that import tariffs could push up the list price of cars imported from Europe to the UK by an average of £1500 if car makers and their retail networks are unable to absorb the additional costs. 

Although most industry insiders say that the new and used car markets are too competitive for manufacturers to pass on any cost increases to the consumer, Rupert Pontin, valuation director at Glass's Guide, which advises on the state of the car industry, has said that Britain is embarking "on a new chapter that's largely unwritten" and that we should expect a "period of instability for new and used car sales".

Fuel prices

The price of petrol and diesel across the UK could fluctuate, due to the real-world cost of importing fuel into this country.

Estimations on how much fuel prices could rise vary wildly, but the RAC has said that a no-deal decision on Brexit, combined with a fall in the value of the pound as a result, could result in record petrol prices. It predicts that the cost of filling up the tank of an average petrol car could rise to more than £70.

However, other industry experts believe that any change in fuel prices is only likely to affect drivers in the short term, because the market is expected to stabilise fairly quickly.

Driving abroad

Motorists wanting to visit Europe on holiday shouldn't worry too much, because the cost of visiting the Continent isn't expected to rise dramatically.

However, a spokeswoman for Jean-Claude Juncker, the president of the European Commission, has said that visitors from post-Brexit Britain will have to fill out an online form and pay €7 (£6) for a visa waiver, which would be valid for three years.

In addition, drivers may need to have their passports stamped at border crossings in future, and additional customs controls could be implemented at crossings, increasing the time it takes to cross into Europe.

Insurance and breakdown cover

Most breakdown providers use locally sourced contractors in Europe, so Brexit isn't likely to affect those services. One area that might be affected, though, is insurance, because non-UK insurers might find it more difficult to operate in Europe.

At the moment, there's a minimum level of car insurance cover required across Europe, and if the UK decides to change its own minimum level of cover, additional protection could be required when travelling abroad.

So do I need to do anything?

The only decision you can take is whether you buy a car now or wait. With UK car sales down in 2018 and consumer confidence dented by the prospect of a no-deal Brexit, dealers are likely to be keen to shift stock. That makes it a good market for buyers. 

The Bank of England has also stated that if we have a smooth Brexit, there could be a faster rate of interest rate increases. Some suggestions are that rates could double to 1.5% over the next three years. So buying before rates rise will be an appealing option to some. 

However, the decision to buy now or wait to see what happens post-Brexit is a personal one that car buyers need to weigh up for themselves.

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