Has the post-Brexit rise in car prices started?

Publications that covered this story include The Independent, City AM and AM-Online, all 9 January 2017.
  • Average price of leasing popular car models up 8% in just two months
  • Rise driven by post-Brexit inflation

Our latest research shows that the post-Brexit rise in the cost of cars to consumers may have started.

The monthly cost of leasing a basket of some of the more popular car models has risen by an average of 8%, from £245.70 to £264.70*, in just two months.

The average cost of leasing popular consumer car models has started to climb as post-Brexit inflationary pressures have begun to filter through to consumers.

We explain that sterling has fallen sharply against the euro and the dollar, pushing up the cost of imports. With large parts of many vehicle manufacturers’ supply chains now overseas, costs are going up and this is hitting consumers.

The mounting financial pressure is now being put onto consumers, and that this could grow going forward as existing supply contracts come to an end and manufacturers are forced to agree a new set of prices based on a new, much lower value of sterling.

We add that whilst the most significant risks for the car industry are those that may emerge post Article 50- in terms of uncertainty over tariffs and a shift of manufacturing to the continent- there are also clear risks in the near term.

Of the models looked at, there are significant fluctuations noted as the manufacturers adjust their discount and end of contract residual value estimates. Of the ten vehicles monitored, five have increased in price, four show no change and just one has reduced in price.

Paul Daly, partner, says; “It appears that Brexit, and the resulting fall in the value of sterling, has begun to place pressure on vehicle manufacturers and their distribution channels, forcing them to shift costs onto consumers. So far it is a small increase but a noticeable increase.”

“Further cost rises could occur as the cost of components produced overseas ratchets up. It is unlikely that the pain will be limited to the supply chain.”

“For consumers, monthly payments are affordable as a result of interest rates remaining at historical lows and heavy discounting.  As this level of discounting is expected to fall as post Brexit pricing kicks in, the maintenance of strong residual values is absolutely critical to ensuring that monthly payments for vehicles remain affordable.”

Monthly lease price of popular car models rising**

Brand Model Spec October price (£) November price (£) December price (£)
1 Ford Fiesta 1.0 Titanium 3 Dr 169.74 169.74 169.74
2 Vauxhall Corsa 1.4 Design 5 Dr 167.74 167.34 167.34
3 Ford Focus 1.5 TDCi 120 Titanium 230.94 240.54 240.54
4 VW Golf 1.6 TDI 110 Match Edition 5 Dr 226.764 241.164 241.164
5 Nissan Qashqai 1.2 DiG-T N-Connecta 259.536 259.536 259.536
6 Vauxhall Astra 1.6T 16V 200 Sri 242.34 242.34 250.74
7 VW Polo 1.0 TSI BlueMotion 3Dr 216.336 218.736 218.736
8 Mini Hatchback 1.5 Cooper D Auto (Chili Pack) 5 Dr 232.14 279.54 297.54
9 Mercedes Benz C Class C220d Sport (saloon) 382.74 382.74 399.54
10 Audi A3 2.0 TDI Sport S Tronic 3 Dr 329.136 307.536 307.536
Average 245.7 250.9 264.7

*Monthly cost on personal contract hire lease including VAT source: www.nationwidevehiclecontracts.co.uk

**The analysis has been performed by comparing a basket of vehicles for a monthly PCH (Personal Contract Hire) deal. It is estimated that over 90% of retail sales are now made on some form of a monthly PCP (Personal Contract Plan) or PCH.