Will Brexit Affect Car Leasing?

Brexit directions

It’s looking more and more likely that a ‘no deal’ Brexit will be the fate of the UK’s exit from the EU, which would bring with it potential price increases for car lease deals and restrictions on how you can use the car.

Are you interested in leasing a car, but want to know whether it’s best to lease before or after the Brexit transition period (31 December 2020)? Read our guide to discover how Brexit could affect car leasing.

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Increased tariffs from a no deal Brexit could increase the cost of a lease car

The UK automotive industry is desperate for the country to strike a deal with the EU to allow for tariff-free imports and exports of cars. Without it, there would be a 10% tariff added onto completed cars imported into the UK from EU countries. According to SMMT (Society of Motor Manufacturers and Traders) research, should this additional cost be passed onto car buyers, it would increase the asking price of cars by around £1,500-£1,700. For electric cars this would be more because of higher premiums placed on these models, mainly due to the costly methods used in building these cars (e.g. sourcing rare Earth materials).

Even though leasing doesn’t require you to purchase the car, the tariff will still apply to these new vehicles brought into the UK. So, should the leasing funders that supplies the vehicles decide not to absorb the full cost of the tariff, it’s likely that it will be spread over the lease cost for the car.

Some manufacturers, including Ford, Mercedes, Vauxhall and Peugeot have already confirmed that the prices of their cars will increase if the UK doesn’t agree a deal. It’s not yet clear whether other car makers will adopt the same approach but, rather concerningly, the ones mentioned above are responsible for some of the most popular models on UK roads.

These include:

Your choice of cars could be reduced massively if EU countries stop exporting to the UK

In the SMMT’s latest trade report, it was revealed that new European-built cars make up 80% of the vehicles on our roads. This compares to just 12% of cars built in the UK sold here.

As it stands, the UK has good trade terms with the EU that means its member countries aren’t hit with tariffs when exporting vehicles here. However, the high costs of European manufacturers producing right-hand drive cars, the potential of importers facing 10% tariffs and devaluation of British currency since 2016 are all factors that could lower profitability. If this happens, the choice of cars available to lease will become less and less as manufacturers from Europe look for better alternatives than the UK for selling their vehicles.

This would be detrimental to people looking for a new car, who would be faced with a significant lack of options when it comes to upgrading. For example, Germany (which sells 750,000 to the UK each year) offers many reliable brands that resonate with British drivers, such as BMW, Volkswagen and Audi. Nevertheless, this only accounts for 10% of EU vehicle production volumes, making it difficult for these individual EU member countries to demand a trade deal with the UK.

Should I look at getting a lease car before 31 December 2020?

Although EU agreements often have some ‘extra time’ leeway, a hard deadline of October 2020 has been set for the UK and EU to come to agree a deal before the transition period date. This is to allow enough time for legal paperwork to be drafted, translated into all 24 official EU languages and then agreed upon. 

This is looking less likely by the day, and some manufacturers have already stated that they’re going to increase prices of their cars in the event of a no deal Brexit. So, if you’re in the market for a new car, it’s likely that you’re going to get cheaper monthly rentals by ordering before a no deal decision.

We recommend looking at our ‘in stock’ special offer cars to avoid having to wait for your car to be built and shipped to the UK. Most factory orders take up to four months to be delivered, so there’s a risk that you could be hit with higher monthly rentals from import tariffs if you take delivery in 2021.

Want to see how much you can save on a brand-new car before the consequences of Brexit hit? Compare car lease deals

Need some more information about car leasing before you start searching? Check out our handy leasing guides for everything you need to know.

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