Cap HPI says it is prepared to handle any large volume shifts in pricing from manufacturers that may arise from a ‘no-deal’ Brexit.
Fleet News revealed last week how leasing companies are being warned about a potential price hike on vehicles if the UK and EU fail to strike a trade deal.
In letters sent to vehicle lease provides by major carmakers, including BMW, Jaguar Land Rover and Mercedes-Benz, they say that the threat of a ‘no deal’ Brexit is to blame for the potential price hike.
If no deal is reached and ratified before December 31, automotive trade body, the Society of Motor Manufacturers and Traders (SMMT), has previously warned that World Trade Organisation (WTO) non-preferential rules, including a 10% tariff on cars and up to 22% on vans and trucks would apply.
That would have equated to a price increase of almost £3,000 on the average UK exported car to the EU, a £2,000 price increase on UK vans exported to the EU and a price increase of £1,800 on cars and vans imported from the EU, if fully passed on to UK consumers. However, the UK is able to set its own tariff levels (as all countries can) and has since published the UK Global Tariff rates, which is the tariff schedule that will be adopted from January 1, 2021.
Following a consultation, the Government has agreed to simplify the tariff levels, with a 10% rate on all cars, vans and HGVs.
Manufacturers are working with Cap HPI on the scenarios relating to the potential charges and where the manufacturers have used the Cap HPI template, the new pricing change data will be ready in its system and visible in the event of a ‘no-deal’ Brexit.
It says that data will be available from January 1, 2021, to ensure fleets can continue to price vehicles accurately and easily.
Despite the Government’s target date of October 31 for a deal to be struck, negotiations are ongoing. If the protracted discussions end in a no-deal and no further talks are agreed, tariffs will come into force on January 1, 2021.
The impact will be significant, says Cap HPI, with vehicle manufacturers having to amend their vehicle and options prices to take these tariffs into account.
Jon Clay, head of vehicle identification at Cap HPI, said: “The team at Cap HPI has worked diligently with partners to ensure the new vehicle data systems are prepared for any eventuality. If a no-deal Brexit is enforced, Cap HPI has ensured it has the teams in place to process the data supplied in an agreed format with the manufacturers.”
Vehicle manufacturers have been working closely with Cap HPI on a wide range of scenarios for some time to ensure a smooth transition for customers. Any pricing changes will start to be visible as early as the manufacturer allows, but most likely changing from January 1, it said. The changes will be made on a model range by range basis.
Experts at Cap HPI have offered guidance on the potential impact of Brexit on used car values.
Andrew Mee, head of forecast UK at Cap HPI, said: “As yet there is no evidence that Brexit concerns are having a negative effect on used car values.
“An outcome that sees tariffs on new cars may result in a reduction in new cars sales, which would be good news for used values.
“In the short term, higher new car prices may pull up some used prices, especially for newer cars.”
However, he said used values are still likely to fall during 2021 as the negative impact of coronavirus on consumer confidence, which could be worsened if Brexit has further negative impact on GDP and unemployment, is likely to outweigh the positive impact of higher new prices.
In the longer term, from three years into the future, the reduction in used supply should help lift used values, which by then Cap HPI expects will have recovered from the coronavirus impact.
Mee concluded: “We will not be altering our future value forecasts until we know for certain that tariffs are being introduced, how long they might last for, and post Brexit economic forecasts are updated, so that we can fully assess the broader picture.”