How CurrencyFair can help when importing cars from the UK
We often share with our blog readers and customers the importance of economic and political events and their impact on FX volatility.
With so many world events taking place this year, the biggest being the spread of Covid-19, we wanted to highlight their impact on car imports from the United Kingdom (UK) to Ireland and how best Irish used car buyers could make savings.
Despite used car imports from the UK decreasing in 2020, Irish car buyers can still avail of savings going into 2021 when importing a car from the UK to Ireland.
What factors have impacted the motor industry in Ireland this year?
This year has seen several factors impact the import of used cars into Ireland. The key ones being:
- Changes outlined in October in relation to Budget 2021.
- The movement of Pound Sterling (GBP) due to continued Brexit negotiation talks.
- The NOx Levy announced in January 2020, affecting the majority of used cars from 2016 and prior.
- The coronavirus pandemic which slowed growth within the motor industry overall.
What are the most popular cars in Ireland 2020?
According to the Central Statistics Office (CSO), the top selling car brands in Ireland in 2020 were:
What changes were made in Budget 2021 relating to car taxation?
For the motor tax on new cars, the number of Vehicle Registration Tax (VRT) bands to calculate the tax on a vehicle will rise from 11 to 20. This will apply to all new car sales from the 1 January 2021. According to the Society of the Irish Motor Industry (SIMI), the changes will mean as much as a €1,000 increase in the price of the average new car.
How did the introduction of the NOx levy impact used car imports?
The introduction of the NOx tax to all new cars and used imports in early 2020 saw the value in buying older cars impacted. In Budget 2021, the NOx (Nitrogen Oxide) surcharge bands were adjusted. The changes in the budget are to bring Ireland in line with the New European Driving Cycle (NEDC) system being replaced by a new system, known as Worldwide Harmonised Light Vehicles Test Procedure (WLTP). Previously, cars first registered prior to July 2008 are rated by engine size, while those rated after then have been taxed based on NEDC emissions ratings. These cars will continue to be taxed based on these criteria. This particularly affects used cars with less than a EURO 6 compliant engine (the majority of vehicles from 2016 and prior) so look for a car that is three-years-old or less.
However, from 1 January all new cars will be taxed based on their WLTP ratings.
As with the VRT changes, there are more bands in the new regime, with the lowest annual motor tax rate of €120 only applying to zero-emissions cars, while a new €140 rate applies to vehicles with emissions of 1g/km to 50g/km. The reasons for modifying the rates and bands for VRT and motor tax were to drive people to make greener choices. This will make the new car market even more challenging for buyers next year, reducing demand and slowing down the replacement of the older cars available to buy. With less used cars becoming available it means Irish car buyers will be looking overseas and the UK for their next car.
Top Tip: From 2 November 2020, the Automated Import System (AIS) requires importers to submit an electronic declaration, using a customs software package.
What are the costs to watch for when importing a car after the Brexit deadline?
From 1 January 2021 take into your calculations the following when you import a vehicle from the UK:
Vehicle Registration Tax (VRT).
Value Added Tax (VAT).
If a vehicle is being imported from Northern Ireland, no import duty will apply but you may be liable to pay:
VAT (only with new vehicles).
In Ireland VAT is generally charged at 23%, and Customs Duty at between 10% and 16% on cars. An electronic customs declaration will be required in advance of the vehicle arriving in the State.
What to watch for when exchanging money to import a car from the UK
The reason for the continued popularity of used cars from the UK in Ireland has been driven not only by the higher specification as standard in used cars available in the UK but by the strength of the euro as sterling struggles against the growing threat of a no-deal Brexit throughout 2020.
Top Tip: From 1 January 2021, if you’re importing cars via ferry using a roll on/roll off (RoRo) service, you must submit a Pre-Boarding Notification.
To understand the volatility at play, we can look at this example: A customer looking to import a car to Ireland from the UK and looking to exchange euro to sterling would have seen the EUR-GBP exchange rate available at 0.8882 on the 5 September 2020 with CurrencyFair.
Data gathered on 16 November 2020.
But sterling would then drop significantly in the next week due to the latest Brexit developments: On the 11 September 2020, the EUR-GBP exchange rates reached a three-month high with CurrencyFair when it was available at 0.9265. This was following Ursula von der Leyen, the President of the European Commission, statement that British Prime Minister, Boris Johnson, had undermined the EU’s trust in the UK.
Data gathered on 16 November2020.
At the same time, new Covid-19 restrictions known as the “rule of six” were being introduced in the UK – further weakening sterling.
This is just one clear example of how sensitive currency markets are to all the political and economic upheavals and how important it is to enable all the correct tools to ensure you are set up for success when exchanging money. This means that for a consumer looking to exchange euro to buy a £10,000 car:
With CurrencyFair (based on the rates available in the above example) you will have required €10,900 * 0.9265 to receive £10, 098.85.
Where a week earlier it would cost you €11, 306 to exchange at 0.8882 and receive £10 041.
In this instance, there is a difference of over €400 in just a week.
How can CurrencyFair help car importers manage currency volatility?
Whilst major banks are currently charging between 3-6% for FX transactions, charging between 3-6% for FX transactions, CurrencyFair has an average margin of 0.45% on the same transfers–but with no hidden fees. CurrencyFair offers two ways to exchange your euros for sterling, both saving you money:
1. Use our Marketplace
CurrencyFair’s Marketplace is a unique peer-to-peer exchange where you can set your own rate, and wait for it to be matched. It’s best used when the exchange rate is trending in the right direction. It’s also ideal for when your exchange is not urgent, as you may need to wait a short time while a match is found for your exchange.
2. Get the best rate available at the time using live rates
If you’re short on time, your best option is to convert your euros to sterling using CurrencyFair’s live exchange service. Our rates are always competitive, and there are no hidden costs.
Then when you’re ready to make your transaction, just send sterling from your CurrencyFair account to the car dealer’s UK bank account.
When importing any car from the UK and paying for it in a foreign currency, it is advisable to shop around and try a different provider than maybe your typical bank. Online transfer experts like CurrencyFair can offer the flexibility and support needed to ensure a stress-free car purchase and savings on your currency exchange plus the tools to help you mitigate any changes in the currency markets.