British motorists face cost increases for both car repairs and insurance

A recent report from the Society of Motor Manufacturers and Traders (SMMT) has revealed that the cost of car services, repair bills and replacement parts could all end up costing British motorists 10% more if the UK leaves the European Union without a beneficial trade deal in place.

If Theresa May decides that no deal is better than a bad deal, the UK would be forced to follow World Trade Organization (WTO) rules. That means British motorists could be looking at a collective bill increase of more than £2 billion per year due to new tariffs that would be put in place.

Do you fancy paying more for your car repairs?

The WTO tariff on imported car parts falls between 2.5% and 4.5%. It would cost the average motorist an extra £21 each year for replacement parts, plus an extra £49 annually on top of this to cover subsidies, customs costs, and regulatory barriers.

80% of car parts in the UK are imported, three quarters from EU countries. Many of these would also be subject to higher charges. The UK would probably have to pay higher tariffs on the parts that are exported to EU countries too.

As such, although there are more components being manufactured in the UK now, the cost of selling them to different countries could jeopardise the amount of money being made by this industry. In fact, it has been suggested that a ‘no trade deal’ could cost British exporters more than £6 billion per year in newly implemented tariffs.

The best way to manage this would be for the government to maintain the UK’s single market and customs union membership until an acceptable trade deal has been reached.

How about paying over the odds for your car insurance too?

As well as the looming spectre of rising repair bills, the Telegraph has recently discovered that motor insurance companies have been inflating repair bills. This is one of the reasons why premiums have been rising.

By charging rival insurance companies up to 100% more than the repairs have cost them, car insurance firms have created a hidden cost layer of around £750 million. That’s equivalent to 5% of the insurance premiums paid by British motorists each year.

With the average cost of comprehensive car insurance now at a record high of £462, this rise in costs has until now been blamed on young drivers, excessive whiplash claims, and tax increases. However, it seems that the insurance firms themselves are partly to blame too.

The Telegraph has revealed that when an insurance firm uses a particular company to fix cars, they can receive discounts for sending multiple vehicles to them. They are under no obligation to pass these discounts on to the rival firm representing the ‘at fault’ driver. Thus repairers will produce invoices for the ‘at fault’ party, then pay the ‘not at fault’ party the difference.

Could the brand be a factor?

Repairers working on BMWs, Audis and Mercedes were found to charge up to 100% higher labour costs than they usually would. This means that the second firm ends up paying far more than the repairs actually cost, and thus increases its premiums to cover this.

The Association of British Insurers, which represents most of the large insurance firms, has been unable to deny the findings. It has stated that the system used by motor insurance firms “could work better.” MPs, consumer groups and repair companies have called for an investigation into the matter.

With repair, maintenance and insurance costs on the rise, it’s more important than ever to ensure that we look after our cars with regular services and by checking tyre pressures, water and oil levels before long trips. A few minutes’ regular attention can help to avoid unwanted trips to the garage, along with extra expense in what is already a difficult financial climate.

Do you think Brexit will lead to higher car repair bills? Could action to bring down insurance companies’ inflated repair bills help to even things out? As ever, share your thoughts in the comments below.