How will Brexit affect new-car prices?

January 04, 2021 by

A last-minute trade agreement between the UK and the EU means that new-car prices are unlikely to rise significantly as a result of changing trade tariffs now that the Brexit transition deadline of 31 December 2020 has passed. 

The agreement of a trade deal between the UK and the EU on 24 December 2020 means that new cars imported to the UK and those exported to the EU from the UK will not incur extra trade tariffs that would have made them more expensive.

There was concern that new cars would have to be imported and exported under World Trade Organisation (WTO) rules, which would have incurred a 10% import tariff – an extra expense that carmakers may have passed on to consumers.

The new Brexit trade agreement will allow these vehicles to be imported and exported under the same trade rules that applied while the UK was a member of the EU. As a result, new cars sold in 2021 should cost broadly the same as the same model sold in late 2020 – before the UK left the European Union.

In response to the new trade agreement, Mike Hawes, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT), said “We welcome today’s agreement of a new EU-UK trading agreement, which provides a platform for our future relationship. We await the details to ensure this deal works for all automotive goods and technologies, including specifics on rules of origin and future regulatory co-operation.

“A phase-in period is critical to help businesses on both sides adapt and efforts should now be sustained to ensure seamless implementation, with tariff-free trade fully accessible and effective for all from day one.”

If you’re looking to buy a new car this year, head over to our car chooser tool to help you decide which model is best for you.

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