Brexit - what does the EU referendum result mean for car buyers?
The UK has voted to leave the European Union, will that change the way you buy a car and how much you'll have to pay?...
On 23 June 2016, more than 30 million voters across the UK made the historic decision to leave the European Union (EU), which the country has been a part of in one form or another since 1973.
The final polls show that 51.9% of the public voted to leave the EU, versus 48.1% who voted to remain. The process of the UK leaving the EU is not a simple one and is likely to take some time - especially as it's understood that the UK won't formally begin the process until at least October.
The delay is due to Prime Minister David Cameron deciding to step down and his replacement, Theresa May, saying she will take time to evaluate the situation so as to take best advantage of it.
What does the result mean for car buyers?
New and used car prices
Car prices are unlikely to be affected for several months, as manufacturers will have committed to sales projections - and the incentives they need to offer to hit them - until at least September 2016, and in some cases until the end of the year.
However, it is clear that the fall in the value of the pound will impact on the incentives car manufacturers are able to offer potential buyers. When the pound was strong pre-Brexit, European car manufacturers had a larger margin to offer incentives and still make good profit - the weaker pound will negate that benefit.
As a result, we expect discounts to reduce once pre-arranged incentives run out. Keep an eye on What Car?’s Target Price fluctuations for signs that this is happening.
In contrast, there is strong speculation that the Bank of England will try to stimulate the economy with an interest rate cut in the coming weeks or months. This is likely to lower PCP and PCH payments accordingly, meaning the majority of buyers who lease or hire their cars will be signing up to lower payments.
As such, buyers must weigh up the benefits of buying now while stronger manufacturer incentives are in place, or holding on in the hope that interest payments will be lower in time.
What is unlikely is that new or used car list prices will rise. Most industry insiders say that the new and used car markets are too competitive for manufacturers to pass on any cost increases influenced by currency fluctuations to the consumer. “It’s a competitive market - and buyers have more choice than ever,” said one.
However, Rupert Pontin, valuation director at Glass's guide - which advises on the state of the car industry - has said that Britain is embarking "on a new chapter that's largely unwritten" and that we should expect a "period of instability for new and used car sales."
The price of petrol and diesel across the UK could fluctuate, due to the real-world cost of importing fuel into this country.
Estimations on how much fuel prices could rise vary wildly, but the RAC has said it could be around 5%.
Any change in fuel prices is only likely to affect drivers in the short term, though, as the market is expected to stabilise itself fairly quickly.
Motorists wanting to visit Europe on holiday shouldn't worry too much, either, as the cost of visiting the continent isn't expected to rise, although drivers may need to have their passports stamped at border crossings in future. Additional Customs controls could also be implemented at crossings, slowing down the time taken to cross into Europe.
The AA has also warned that the cost of filling up your car abroad could also rise, predicting that a 'worst-case scenario' would see prices soar by up to 18.7p per litre due to a drop in the value of the pound and a potential rebound in the price of oil.
Insurance and breakdown cover
Most breakdown providers use locally-sourced contractors in Europe, so Brexit isn't likely to affect those services. One area that might be affected, though, is insurance, as non-UK insurers might find it more difficult to operate in Europe.
At the moment, there is a minimum level of car insurance cover that is required across Europe, and if the UK decides to change its own minimum level of cover, additional protection may be required when travelling abroad, which could in turn push premiums up.
Trade and the car industry
Throughout the campaign, the UK's vibrant motor industry has come out broadly in support of remaining in the EU, although a significant minority was in favourof Brexit. Many car makers with a presence in the UK have owners overseas, and many more consider that exporting into Europe and benefitting from a free flow of workers is vital to their success.
Last year alone, 57% of the 1.5 million cars made in the UK were exported to Europe.
Speaking one month after the referendum result, Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), which represents the views of the motor industry, said: "The current uncertainty is praying on the minds of all those in the UK automotive industry. It will do its best to manage the situation - but a majority of the industry is worried by the situation.”
Chief among the concerns of the industry are the potential for new tariffs to be introduced, the potential higher administration costs of dealing with more individual markets and the potential restrictions on freedom of movement for workers. “Europe is the biggest market for our manufacturers and we face losing the stability we’ve had and a future place at the table when regulations are being written,” said Hawes.
So do I need to do anything?
The only decision you can take is whether you buy a car now or wait. All experts say that it is still far too soon after the public vote to know what the future holds. However, if the pound’s value stays low relative to the Euro, it seems that new car discounts will decrease from autumn 2016. In contrast, though, it is widely predicted that interest rates will be reduced, which should lower the cost of PCP and PCH deals.
Beyond that, the UK will still be a member of the European union for at least another two years. This is because in order for the UK to leave the EU, we must invoke what is known as Article 50, which begins our exit from Europe.
However, that process takes two years, meaning that any new changes are unlikely to appear before the middle of 2018 or 2019.