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No Deal Brexit

Lets face it, we came in to 2020 fed up of hearing about Brexit, Brexit and more Brexit. Its all we heard on the news. Would there be a deal, would it be a hard Brexit? Then Covid arrived and literally turned the world on its head. Brexit was a forgotten subject, pushed to the middle of newspapers and featured for all of 2 minutes a week in the news.

That changed this month when Boris and the EU suddenly remembered that the deadline for a deal was looming. In truth although the year was dominated by Covid nothing changed, nor would have it changed with regards to Brexit. It was always going to go down to the wire with political posturing and points scoring the name of the game on either side of the channel. The Tories (love them or hate them) have promised to deliver us Brexit as per the (very slight) majority vote of the British public and the EU meanwhile can’t be seen to give us an easy exit as it may very well pave the way for the entire collapse of the single European market with many other countries deciding to follow suit.

Brexit means a lot of things, problems and some benefits for a whole number of different people and industries, but we deal in cars and vans and that’s what I am going to focus on. No scare-mongering here, just the facts and potential outcomes if we leave without a deal (which seems the likely scenario as Boris is absolutely adamant he won’t budge on the sovereign rights of the UK’s right to deny EU fisherman access to its waters to fish – a key piece of the deal many that voted for Brexit are backing him on as well)

If we leave the single market without a deal we will be subject to tariffs and border checks on the import of goods from Europe. As part of the EU we have, until now, being exempt from these. Likewise our EU counterparts will be in same situation with goods being delivered out of the UK into Europe.

Border checks, either for lorries coming in (with car parts) or boats arriving with vehicles means delays. You will have to wait longer for your vehicle.

WTO rules: If countries don't have free trade agreements, they must trade according to rules set by a global body called the World Trade Organization (WTO), which generally involve tariffs, which are taxes on goods brought into a country. Cars would be subject to an estimated 10% increase. Parts are likely to increase by 2-3%.

So in a nut shell as it stands the cost of a new car (as almost all are imported from the EU) would increase by 10%. Manufacturers are not able to discount this as it’s a tariff that is not discounted, amendable and is enforced by WTO rules which means the cost will be passed on directly to consumers. This is a hammer blow for many people as cars have become increasingly expensive in the last 18 months as manufacturers clamber to driver down emissions (ironically set by the EU), and increase technology as standard to make cars safer for drivers and pedestrians.

Now the above is a lot to take in. I want to simplify it to show how it impacts you as a consumer when you lease a vehicle on PCH or BCH, or PCP.

Current cost of car = £30,000 
Residual Value = £10,000 
Manufacturer Discount = £10,000 
Amount to be financed £10,000 
Interest = £500

Rental of car over 36 payments = £291.66+VAT

If we add the new 10% tariff on to the cost of the car the new price of the vehicle becomes £33,000. Residual Values (what the car is worth at the end of the contract) are unlikely to increase and will remain static so you effectively have to fund the additional 10% in your monthly rentals.

£3000 extra split of the 36 payments increases the rental on the same vehicle by £83.33. £291.66 becomes £374.99+VAT

Quite the increase, right?! That’s also excluding that the more you borrow the more the finance will increase.

And that’s why we are encouraging customers to order whilst manufacturers are willing to “Brexit Price Protect Vehicles”!! Don’t extend your lease thinking you will get a better deal in 2021 – the simple answer with a no deal Brexit is that you wont and you will be paying an extra 10% to top up the coffers of the EU via the WTO tariffs!!

NORTHRIDGE CARS  IS AUTHORISED BY THE FINANCIAL CONDUCT AUTHORITY. We are a credit broker and not a lender, which means we can introduce you to a limited number of finance providers, who may pay us a commission. Registered No : 661126

Registered in England & Wales with company number : 4256533 | Data Protection No : Z3092722 | VAT No : 772506230  BVRLA Leasing Broker Registration Number 1965

Registered Office : 1-3 St Albans Hill, Hemel Hempstead, Hertfordshire, HP3 9NG

Disclaimer: All vehicle images and descriptions are for illustration and reference purposes only, all vehicle leases are subject to credit approval and subject to change at any time. E&OE.

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