A surge in low-priced UK used imports is expected after the Brexit vote. Dealers are predicting this in turn wil l cause Irish used car values to plummet and may lead to a noticeable drop in new car sales.
Car data experts Motorcheck.ie have warned that now Brexit is confirmed the impact on the Irish Motor Trade is set to be negative. According to its manageing director, Michael Rochford, the financial markets expect Sterling to weaken against the Euro by between 15-25 per cent meaning imports from the UK become more attractive prompting a further surge of used vehicles imported from the UK hitting our shores in the coming months. The extent of this will be largely determined by economic factors.
Worrying times for motor trade
"The knock on effects of Brexit are potentially very worrying for both the new and used car markets in Ireland, " says Rochford "Firstly a weakening of sterling and a surge of cheap UK imports will mean used car values in Ireland may fall sharply from their current position. This may leave many car buyers in negative equity as the value of the car they are driving falls beneath what they owe".
The effects of a sharp fall in used car values may be particularly pronounced for vehicle dealers and manufacturers who have underwritten “guaranteed minimum future values” on PCP deals.”
He warns that for the consumer, negative equity at the end of a PCP deal means they are potentially faced with the choice of:
1. refinancing a vehicle in negative equity;
2. handing back the car and getting into another PCP deal;
3. opting for a cheaper used car.
Refinancing a vehicle in negative equity will be unpalatable for many as the banks will only finance the market value of the vehicle leaving the consumer to cover any negative equity themselves.
Getting into another PCP deal might initially sound good, but they are bound to become less affordable as residual values drop. The prospect of handing back the car on PCP and opting to finance a cheaper used vehicle looks financially most attractive.
For those now considering a UK import on the back of the weaker sterling, Rochford warns that “buying a used import has its own risks, as we are all too aware, given the high incidence of clocked and written off cars so consumers need to remain vigilant and check the history of any used car no matter how attractive it looks on paper”.
