As we start the New Year, many will be filled with a foreboding sense of dread about what’s to come. Whether you’re in the “leave” or “remain” camp, Brexit (so far) hasn’t quite met anyone’s expectations.
As B-day approaches, we’re still no closer to knowing what it means. The UK’s automotive industry is perched on the edge of its seat in anticipation of the final deal…or in fact, no deal at all.
The vehicle leasing industry is a small but vital part of this ecosystem, so what does all this mean for leasing companies, its suppliers and the end customer?
Tightened purse strings
Over the next year, there’s likely to be a measurable dip in consumer confidence. In uncertain times, it’s normal for people and businesses to tighten their purse strings and delay large financial decisions.
While this will almost certainly impact the new car market, the leasing sector may be able to monetise on such uncertainty. By its very nature, the industry is well-placed to offer attractive contracts on high-value items, making it seem a more affordable option and a lower risk investment for many.
Passing the buck
It’s inevitable that costs will rise across the supply chain and they already have. In fact, the cost of leasing a new car went up by 9 percent on average in the year leading up to April 2018, with the biggest rises seen for German-made cars: Mini Cooper D (31 per cent); Audi A3 (23 per cent) and Mercedes-Benz C220 (19 per cent).
Currency fluctuations are also causing havoc, pushing up costs across pan-European supply chains. In a no-deal scenario, we can also expect tariffs on imports and exports, adding a premium to European-made vehicles.
Leasing companies will have to decide whether to absorb these price increases and weather the storm or pass the buck to customers, making their contracts less attractive.
Regulatory complexities
UK car leasing companies are currently regulated under EU law so it’s likely if we leave the European Single Market (ESM), the Financial Conduct Authority will take over.
In this scenario, the government will have a lot on its plate, so overhauling motor finance regulation is unlikely to be top of its list.
However, there is scope to review policies later down the line to make access to finance easier and increase consumer rights. The benefits of this would be felt by the car leasing sector, giving personal and business finances a much-need boost.
By Tom Preston, Managing Director, Hippo Leasing
