What a no deal Brexit means for car leasing

Brexit, car leasing and the wider automotive industry.

With the Brexit withdrawal agreement seemingly taking a back seat in the press due to the mounting implications of the COVID-19 pandemic, the UK’s official exit from the European Union has appeared to sneak up on us unannounced.

The 12-month transition period that began in January 2020 will end on 1st January 2021. Negotiations are still taking place around a Brexit exit deal. But, without one, the trade agreements currently in place that govern our commercial relationships with Europe will cease alongside our EU membership.

At the very least this will cause a period of uncertainty until new agreements can be made and implemented. At the worst, this will sever trade agreements more permanently. Leading to greater and prolonged trading restrictions, delays, and increased costs.

How will Brexit affect the automotive industry?

The whole automotive industry is united in the plea for an effective trade agreement that protects against increased trade tariffs from day one. This is because the automotive industry is poised to take a big financial hit without an effective exit deal in place come January. Not just as a result of the unavoidable drop in consumer confidence but also due to supply difficulties and price changes that will further affect demand.

As an industry that relies heavily on the import and export of goods, the potential delays and increased costs associated with a no deal exit are expected to cost £55 billion in manufacturing value over five years. To new car buyers, a no deal would result in a 10% tariff added to products overnight. In real terms this would add an average of £1900 to the cost of a car or van imported from the EU.

Why should this be a concern for the UK more generally? The automotive industry is worth an estimated £83 billion annual turnover. It is the biggest exporter of goods within the UK and employs over 823,000 people. Any negative impact on the income of the automotive industry will therefore have devastating consequences for the UK economy as a whole.

How will Brexit affect the car leasing industry?

Hope remains that HM government will agree a deal that will limit disruption and price rises among the automotive industry. If this does not happen, the car leasing industry will be subject to the same changes as the wider industry.

In the event of a no deal Brexit we can expect delays to factory order vehicles and this will put pressure on demand for the stock of vehicles already in the UK. Additionally, manufacturers are taking varying positions on whether they will price protect vehicles that will become subject to additional tariffs after January 1st in the event of a no deal Brexit. This is regardless of whether orders are placed ahead of time.

To customers looking to lease a car in 2021 and beyond, a no deal Brexit will result in price increases and stock pressures. Our advice to customers is therefore to start your car search as early as possible and place your order before the end of the year if you are in a position to do so. Search in-stock lease cars to secure a reduced price on models already in the UK.

Matt Woodward, Carparison General Manager, commented,

“We are committed to continuing to work with our partnering dealerships, manufacturers and funders to ensure the effect on our customers is kept to a minimum regardless of how we leave the European Union on January 1st. The absorption of additional fees will be considered at every opportunity by each of these parties and ourselves, but this certainly is not guaranteed. To customers who need a new car in the next few months, you could be far better off placing your order sooner rather than later. Avoiding any price hikes, which could be as much as 10%.

A lot remains unknown at the moment. So naturally when we know more, we will update our audiences accordingly.”

The benefits of car leasing post-Brexit

However, there is some good news. No matter what happens come January 1st, choosing to lease your next car can help minimise the personal effects of a no deal Brexit on motorists. This is because car leasing can offer some unique ways for customers to keep costs down and offers access to wider stock volumes.

• Availability – We have access to nationwide stock from our partnering dealerships and manufacturers across the UK. Not only does this allow us to offer only the most competitive prices through an increased range of choice, it also means we can offer our customers access to unprecedented amounts of in stock vehicles from dealerships across the UK.
• Spread the cost – Leasing is one of the most accessible means of vehicle finance. Without a cumbersome initial payment and with pre-agreed monthly payments, it’s an easy way to budget for a new car. It allows you to spread the cost and, unless otherwise stated, includes road tax, delivery and breakdown cover as standard. If you have no choice but to order your new car post Brexit, leasing will provide a convenient way to spread the cost without the interest charges applicable to other financing products.
• Avoid increased repair costs – A no deal Brexit will affect the price of vehicle parts as well as the vehicles themselves. Therefore, the cost of vehicle repairs is expected to increase accordingly. By leasing a brand new car, you are choosing a vehicle at its most reliable. Reducing the time and money you spend at the garage has therefore never been more important!

SEE MORE: on the benefits of car leasing

Whatever happens come January 1st, the Carparison team will be on hand to help you find the perfect lease car for your budget. Whether you're looking for a family SUV, a sporty convertible or are sold on an electric lease car, make Carparison your first choice.