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The Impact of Brexit on the UK Auto Leasing Industry

2018-12-26 11:09 Wednesday

The UK exports 800,000 vehicles and imports 2.3 million vehicles from EU member states every year. However, with the date for Brexit is around the corner, many industry analysts believe that the UK's automotive industry will face new challenges, especially in its car leasing sector.

auto leasing industry

The UK's motore finance regulation currently takes effect under EU law, and may be passed over to the UK's Department of Finance after Brexit. It remains unclear how much legislative reform will be promulgated during the Brexit transition period.

Since the UK government wants to ease the hardship on businesses engaged in cross-border trade, it may adjust its auto industry regulations to reflect the new reality. Such reforms may make access to finance easier while also increasing consumer rights and protections, benefitting both leasing companies and their customers.

Currency fluctuations are raising the cost of imported vehicles, and with the pound continually down against the Euro, many European carmakers, including  Mercedes, Fiat, Renault and BMW are passing increased costs down the supply chain to dealers and brokers.

Recent market research has revealed that the cost of leasing a new car in the UK increased by 9% on average over the past 12 months, with the biggest rises seen for German-made cars: the Mini Cooper D, up 31%; the Audi A3, up 23%; and the Mercedes-Benz C220, up 19 %.

The challenge ahead for leasing companies will be how to counteract their rising costs from the market or customers. Deep discounting attracts customers but can be risky if demand isn't strong enough.

The UK car leasing industry is on the rise, as evidenced by the fact that the total fleet grew by 5% from January to June 2018, a total of 302,413 contracts. The UK is currently the third largest auto and asset leasing market in the world, putting it in good shape to weather the post-Brexit uncertainty. While the next couple of years will be challenging for the sector, there are also positive indicators, making the future difficult to project.

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