Sterling slump driving used car imports, but for how long?
Cantillon: Hard Brexit will put the brakes on imports, so now’s the time to grab a bargain
If you believe that Britain will crash out of the EU at 11pm on March 29th next, you need to start kicking UK tyres over the next few months
In contrast to the rest of the consumer market, new car sales are in a slump. Regardless of whether you measure new sales based on when a car is first registered or first taxed (and there’s a gap of 10,249 between those two so far this year), the market is down over 4 per cent.
The reason for the slump? All fingers point to used car imports from the UK, where, thanks to Brexit’s impact on sterling, there are some very tempting deals to be had. That may come to an end, however, if a hard Brexit comes to pass.
If you believe that Britain will crash out of the EU at 11pm on March 29th next, you need to start kicking UK tyres over the next few months. Because, in that event, 23 per cent VAT will apply on all these UK cars imported here. If it’s a really hard Brexit with no customs deals, a 10 per cent customs duty will also be due.
According to the latest data from the Central Statistics Office, in the seven months to the end of July, 58,474 used cars have been re-registered in the Republic. That’s up 11.3 per cent on the same period last year.
The lure of a weak sterling is not just tempting private buyers from the Republic. Dealers are also partaking in the cross-border traffic, using excess stock from our nearest neighbours to fill a demand for older vehicles.
Relatively low levels of new car sales here during the recession means that there is unsated demand for used cars amongst buyers looking for cars from 2013 or 2014.
Even if sterling continues to nosedive against the euro after Brexit, adding 23 per cent VAT – and potentially another 10 per cent customs duty – will effectively kill off the used car import markets.
That may seem like good news in the short term for dealers eager to sell their new cars, but the motor trade doesn’t exist in a vacuum, and the wider economic hit will tarnish any positives the trade could perceive from cutting off the supply of imports to potential customers.
For consumers, there may be some comfort to be had if there is a transition period until Brexit fully bites, but that will only delay the issue until after 2020. If you don’t like the current mood music emanating from Brussels and London, you might want to make your cross-border motoring purchase before next March.