Britain has voted to exit the EU – with 52 percent of those turning up at polling stations voting leave in the June 23 referendum – a decision that has a number of likely repercussions on car buyers.
The Governor of the Bank of England, Mark Carney, has said in a statement: “Some market and economic volatility can be expected as this process unfolds. But we are well prepared for this. Substantial capital and huge liquidity gives banks the flexibility to continue to lend to UK households, even during challenging times”.
With around 80 percent of UK motorists funding their car through finance schemes, the cost of running a car could change, should the Bank of England decide to alter interest rates.
Depending on what happens, however, interest rates could rise or fall; with the value of the pound expected to drop the Bank of England could hike up interest rates to curb inflation. If there were a severe hit to the UK economy, though, the Bank may be forced to consider dropping interest rates.
While this should not affect those people who are already tied into a PCP, PCH or Hire Purchase agreement, it could change the cost of new finance schemes and affect those intending to move from their current contract to a new finance agreement at the end of the term. The falling pound does raise the likelihood of increasing the cost of buying cars imported from elsewhere in the world.
Meanwhile, a key factor in ensuring the health of the UK car industry will be the Government “securing tariff-free access to European and other global markets – making the UK the most competitive place in Europe for automotive investment,” according to Mike Hawes, chief executive of the SMMT – the UK automotive sector trade body.
There should be no immediate impact on consumer rights, however, states the Financial Conduct Authority. “Consumers’ rights and protections including any derived from EU legislation, are unaffected by the result of the referendum and will remain unchanged unless and until the government changes the applicable legislation.”
This view is supported by Stephen Sklaroff, director general of the Finance and Leasing Association (FLA): “We are at the beginning of what will be a long process of discussion and negotiation. The current legal and financial regulatory framework for FLA members remains exactly as it was before the vote, and it is likely to be so for some considerable time.”
Consequently, the impact that the vote to leave the EU will have on car owners depends completely on the framework the UK manages to establish from now on. However, provided you stick to your budget, our advice is that it could be a good time to sign up for a car finance deal.
With a number of zero-percent APR options available, the best rates can only go up – if they change at all – as we go into the third quarter on July 1 and car companies update their finance schemes. Click here to read more about the impact of the Brexit vote on the UK car industry over on our sister title CAR magazine.
