Saturday 16 December 2017

The pall of Brexit hovers as 162-reg buying gets into full swing

Fears raised on how lower-cost imports could affect values

PCPs may not be as affordable if Brexit affects used car prices.
PCPs may not be as affordable if Brexit affects used car prices.
Eddie Cunningham

Eddie Cunningham

The mid-summer new car buying spree is in full swing - but there are concerns in some quarters over the impact of Brexit on the value of new and used vehicles in the medium term.

Latest SIMI figures show registrations are up 23pc to June. Dealerships are ready for a busy time, as 30,000-plus people are expected to buy new this month.

The new SIMI statistics show 161-reg registrations were up 23pc (to 101,338 from 82,337). And its Director General Alan Nolan says he expects this year's total sales to reach 150,000 for the first time since 2008. "This year promises to be the first normal year of registrations since the recession."

Apart from the economic upturn, the wide availability of finance, especially Personal Contract Plans (PCPs), has been hugely influential in the rise in new car registrations.

A reflection of business confidence is the 26pc increase to date in the purchase of Light Commercial Vehicles (LCVs).

But the sales are clouded somewhat by concerns emerging from some quarters of the industry over the effect Brexit will have on used car values if sterling falls.

Some sources have their concerns but don't want to say anything publicly at this stage. There is a sense that a weak sterling factor could hit people in their pockets by helping to reduce what they get for their trade-ins.

Quite a few think it will, at worst, be a short-term problem and even itself out over the coming months.

But managing director Michael Rochford is one who believes Brexit could have serious knock-on effects on all car values. He says the used-car market could be hit as sterling falls against the euro. He fears the value of secondhand motors will begin to drop in the face of more and cheaper UK imports. "This will certainly have knock-on effects in the new car market also," he says.

Used imports are up 27pc (32,498) and could hit 60,000. "Those looking at expensive Irish stock will start looking at the cheaper UK alternatives."

And that, he predicts, will mean lower prices for your car on trade-in. "This was always expected to happen as the boom in new car sales over the past 2-3 years would inevitably mean a healthy flow of stock starting to hit the used-car market in the next 18-36 months. The consequences of Brexit, however, look set to accelerate this process."

Mr Rochford says this has potentially serious consequences for the new car market, as a sharp drop in used car values may mean that Irish vehicles coming back off PCP will be overvalued.

That could mean a "glut" of overvalued PCP's will soon be heading for dealerships.

He says that many dealers are hoping the customer will opt to hold on to the car by refinancing it or buying it out.

But he doesn't believe consumers will want to buy a car in negative equity and says banks will not finance the negative equity. "So who takes the hit?"

He argues that if used car values are affected, then PCP's will not be as affordable as in recent years.

That's because the car's guaranteed minimum future value is reduced.

"If there is a sharp drop in used values due to Brexit then this could have a severe effect on the PCP market here," he claims.

He adds: "It is possible that 2016 will see a peak in new car sales and 2017 may experience a decline in new car sales if some of the potential consequences of Brexit come to pass."

He, and some others - by no means all - say the next six months will be nervy for a lot of people. But many believe if there is to be uncertainty it will be short-term.

Indo Motoring

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