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Brexit and Car Prices – What are the Risks? – Motability’s view – from the Motability website dated 3rd December 2020:
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2020 has been a dramatic year for us all, and the motor industry has faced its own particular challenges. The pandemic forced car dealers to close, delaying deliveries of ordered cars – and it also saw factories shut down for months on end, which has had a knock-on effect on new car orders when restrictions began to lift. As the latest lockdown transitions into a stricter three-tier system, yet another challenge looms on the horizon: Brexit.
First things first, for Motability Scheme customers who already have a car on order: there’s no need to worry. The Motability Scheme is guaranteeing your order, including any Advance Payments – and if you have placed an order, you will not subsequently be required to pay more, no matter what happens with Brexit. You don’t need to do anything, other than keep in touch with your dealer about delivery dates.
Everyone on the Scheme is also working closely with car manufacturers to ensure as much continuity as possible into early 2021. The Motability Scheme Car Price Guide will be announced in early January 2021 and in these times of uncertainty, the team there are making great efforts to keep things as similar as possible, assuming that a Brexit ‘deal’ can be reached before the end of the year.
More broadly, the focus for the wider UK motor industry is whether a deal can be struck with the European Union, when the current transition agreement ends on 31 December 2020. The UK has already left the EU, on 31 January 2020; the past few months have been spent discussing a Free Trade Agreement – or ‘deal’ – that works for both sides. It is a highly complex discussion and it is still hard to say for sure what will happen.
It’s not possible to know, therefore, what the precise impact will be on the range of cars and prices available from 1 January. There is, however, a clear risk. If a suitable deal is not struck, the import of cars from the European Union into the UK risks reverting to World Trade Organisation (WTO) rules. These place a 10% tariff on vehicles arriving in the UK. Industry trade body the Society of Motor Manufacturers and Traders says this would add around £1,900 to the price of the average car imported into the UK. Even on a basic supermini-style small car, with a list price of £16,500, this would result in a price increase of £1,650. For a £25,000 vehicle, the price premium would be £2,500.
Car manufacturers are currently not able to go into model-by-model specifics. We simply don’t know what the situation will be – but I do know that each brand is preparing for all eventualities.
Of course, Motability Scheme customers lease cars rather than buy them outright. However, list prices still play a major role in deciding which cars are available on the Scheme, and in setting Advance Payments. If prices do have to rise because cars are subject to WTO tariffs, the result may be fewer cars with no Advance Payments, higher Advance Payments for other models – and where prices are maintained, it may be for a lower-spec vehicle than before.
An additional complicating factor could be due to where cars are built. Only models imported from Europe will be subject to WTO tariffs. Kia, for example, builds its popular Ceed and Sportage models in Europe – but imports other cars. This could result in changes in the types of vehicles available on special offer, and maybe also the line-up of cars offered on the Motability Scheme… but again, it is too early to say. My tip, if a Brexit deal cannot be struck, is to not be surprised if a few new and unfamiliar models start appearing on the Scheme during 2021.
As I said at the start, the combination of Brexit and the Covid pandemic means 2020 has been a year like no other. Many Motability Scheme customers have faced delays for new cars, which have been an unfortunate by-product of the coronavirus crisis. It is simply too early to say what the impact of Brexit will be.
The best outcome will be for a Free Trade Agreement deal to be struck. This will ensure as much continuity as possible for the UK come 1 January 2021. There may be short-term disruption to the supply of vehicles, as importers become accustomed to new customs rules and regulations: you may have to wait a little longer for your new car as a result. But these should not be significant – and the Motability Scheme will work with your supplying dealer to ensure you keep mobile until your new car is ready for delivery.
A different situation exists for the January price guide, and at present, it’s not possible to say what the overall impact will be on the range of cars and prices available. There is likely to be disruption within, and outside the Scheme – but rest assured that the Motability Scheme will be working hard to achieve the best possible outcomes for its customers, in the short and longer term.
If the UK announces the failure of talks and we are heading for a ‘no deal’ Brexit, there is likely to be serious disruption to the car market. In these circumstances, the Scheme will protect existing orders under its usual price guarantee, though there may be delays in delivery. As explained in Richard Aucock’s article, there is also likely to be a sizeable impact on future pricing. Our ability to take new orders would depend on getting confirmation on these prices.
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Dave that’s more or less what I was told when I contacted them a couple of days ago. The chap was seriously concerned the affect a no deal would have on the scheme.
I do believe BJ will ride in on his white stallion and agree a deal this weekend, stealing all the credit for a FTA in the process.
I’m pretty sure the deal won’t please the ERG, so even if a deal is agreed I don’t think I can hear the fat lady sing…………..just yet.
that was an interesting read, but when motability mention price increase you now it will go up. It’s. Sort off worrying about the choice we will have and AP we will need to pay, I can’t see there being any deal , it might even be just uk manufactured car
But yet if that happened motability would loss a lot of money . I just think motability will yet again up the AP , I do not think it looks favourable for us the customer
To be honest it is going to be same for everyone Mobility or private, the knock on effect second hand prices may increase.
Unfortunately I have suffered a brain injury and occasionally I get confused and often say the wrong thing.
There could be a range of distortions & waiting times. Take for instance a Hyundai Kona, if it’s made in the EU then it could take the 10% tariff hit, wheras a Hyundai Kona made in South Korea would be subject to our new trade deal & be unaffected. For us the consumers the Kona would come from South Korea instead of the EU, for the EU they would lose the production, and for Hyundai it’s just logistical changes.
There will be winners & losers, just as there has been from the EU insisting we buy goods from them rather than our own families in places like Canada/NZ/Aus, for the last number of decades.
I strongly suspect that some form of deal will be done at one minute to midnight, as is always the case with the EU. People seem to talk of a no deal as being a problem just for the U.K. It will be a problem for the EU as well, so a work around will be found – deal or no deal. Even if there’s no deal, I just don’t see a flat 10% increase in what customers will pay. Some, if not most, will have to be absorbed by margins for brands to remain competitive. Anyway, look on the bright side, perhaps a no deal scenario may be the push needed (by both Motability and the manufacturers) to get more U.K. built cars on the scheme – namely Land Rover and Jaguar. For that to work we would need a hike in the somewhat arbitrary price caps or, preferably, scrap them – though I doubt they will do that for fear of the Daily Mail. In any event they are overdue an increase.
Well, I can order a new car as from yesterday. I have been thinking hard about Brexit, Covid, the current situation as regards new cars, etc and have been wondering whether or not to wait until Q1. Having read the above though – I think I will put my order in ASAP!!!
Solent Corolla icon now in 2 litre for £700 new 2021 corollas on scheme now I’m waiting for 2021 Chr think be just be different lights etc
Solent I think that’s a good idea, its almost impossible to gauge what will happen Q1 so just order and get your dealer to give you the AP Q1 if it is lower. Some dealers won’t do this but most do.
Mike: yeah, I still love the look of the Corolla – especially the GR Sport 2 litre in bi-tone black & white.
Brydo: whichever car I end up ordering – I’m hoping to put my very best bartering skills to the test & get something… anything off the AP!!! As you say; I hope that in the (unlikely?) event that AP’s go down in Q1 – my dealer will honour the ‘new’ lower price.
I have watched numerous car reviews on YouTube and read 9, 674 road tests/reviews on cars that I’m interested in. At least I will be well-informed & clued-up when I get to the showrooms!
@solent60, placing an order now even if the dealer won’t agree to honor a Q1 price drop is still the best thing to do, if prices do drop then just cancel and reorder again as you are only going to lose 3 weeks at the most!
Solent why not create a thread like Glos Guy did and ask for any input on the cars on your list?
Solent why not create a thread like Glos Guy did and ask for any input on the cars on your list?
Good idea, although I didn’t glean a great deal of useful info when I did so, which surprised me given the number of very knowledgeable and passionate posters on here!
Solent. I too am in that position. I can order from 4 December and agonised over whether to stick or twist with my selection. But I decided that my preferred car , B 200, ticked all my boxes and I would have been a bit miffed if it went up in price or worse still disappears from the scheme altogether. So I ordered but I will be interested to see what happens come 1 January.
I could order from 2/12 and did so on the 3rd, didn’t want to lose the choice I’d made, might still be there, might be more but can’t see it going down!
Bz4x fwd vision in silver
Exactly why i ordered as the dealer was adamant the car would be coming off in Jan but as i ordered a stock car he also agreed that i could cancel at anytime between now and FEB should i change my mind or something better appears or the AP drops.
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Hyundai Ioniq 6 Ultimate trim
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Loves 3D printing & Plastic model kits
----------------------------Cheers all. I think we’ve termed a new phrase called “Quarterly Anxiety”! Should I order? Shouldn’t I order?
I’m going to contact a few dealers this week and test drive a few models. I’ve kind of figured that if I order later this month – nearer Xmas – then if I do have to cancel due to prices going down (unlikely I know) and the dealer not playing ball, then the dealer won’t be too miffed if I re-order a few days later in the new quarter.
I don’t need a big car anymore… not that my C-HR is ‘big’ exactly. Kids have all left home now. My partner’s elderly mum passed away from Covid three weeks ago now & we had the funeral last Wednesday gone, so there’s only us two left at home now. I have always loved the look of the new Peugeot 208 GT Line in faro yellow & that is top of my wish list. The £849 AP is pretty reasonable & winning European Car of the Year 2020 as well as very good driving reviews from around the world makes me think it would suit me very well indeed. I can’t see that AP being any less in January if I’m honest & I am as certain as I can be that the model won’t be removed from the list.
Fingers crossed that it drives as good as it looks!
Apart from the occasional “good deal”, last quarters xc40, VW Tiguan during the spring/summer APs is only going one way and that’s up. We’ve seen relatively standard cars come into the £3000+ AP range.
I’m afraid to say it but, unless our government contribution increases dramatically, the scheme will have fewer cars available year on year.
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