A surge in cheap UK imports may see used car values plummet and consequently new car sales falling in the wake of Brexit, car data experts Motorcheck.ie have warned.
With financial markets expecting Sterling to weaken against the Euro by between 15 to 25 per cent, Motorcheck.ie is warning that imports from the UK may become more attractive, prompting a further surge of imported used vehicles from the UK hitting Irish shores in the coming months.
Commenting on the potential effects of this, Michael Rochford, managing director of Motorcheck.ie, said: “The knock-on effects of Brexit are potentially very worrying for both the new and used car markets in Ireland. 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.
For the consumer, negative equity at the end of a PCP deal means they are potentially faced with the choice of: refinancing a vehicle in negative equity; handing back the car and getting into another PCP deal; or opting for a cheaper used car. Motorcheck.ie warns that if this situation emerges it is possible that new car sales, which have been riding the crest of the PCP wave in recent years, could begin to fall. If used car values drop sharply and PCP becomes less attractive, many people buying new cars may switch to a more affordable, almost new import from the UK, it says.
While the economic impact on the new car dealer and distributor in Ireland could be severe, on the flip side used car sales may begin to boom via a surge in cheap UK imports and falling used car values here.
However, Motorcheck cautions that buying a used import has its own risks given the high incidence of clocked and written-off cars, so consumers need to remain vigilant and check the history of any used car.