Prices of Japanese car imports are at the mercy of exchange rates!
The number of Japanese yen that can be bought with a British pound has dropped slightly in recent weeks, probably as a result of concerns over China’s stock market collapse. This graph shows the drop earlier in August 2015.
So I thought it would be good to look at how exchange rate changes affect the cost of Japanese car imports. If you’re buying a car that has already been imported into the UK by someone else, they will have dealt with all the currency exchange parts of the transaction already.
Although that doesn’t mean the exchange rate hasn’t affected the cost of your imported Japanese car: the price of the car may be adjusted up or down depending on how the importer’s costs have been influenced by exchange rate changes.
The costs of Japanese car imports depend on 2 exchange rates at 3 different time points
It isn’t quite as simple as a 10 % shift in exchange rate making your car 10 % cheaper or more expensive!
If your car is being bought for you from a Japanese car auction, there are potentially 4 different currency conversions that can influence the final price of your car: 3 GBP to JPY conversions and one GBP to USD conversion.
They all happen at different times, and because currency exchange rates change on a daily basis, this makes the final price of your car impossible to know until the last conversion has been done. Currency conversion occurs:
- When you pay the reservation fee.
- When you pay for the car.
- When you pay for shipping (usually billed in USD).
- When you pay import duty and VAT.
No one will be able to tell you exactly how much your car will cost until it arrives in the UK, because this is when the last currency conversions are done and exchange rates could have changed since the car price was estimated.
If you are about to buy a car and are certain the exchange rate will only get worse, you could of course buy enough Japanese yen to cover the entire cost of the car in advance of needing it, thus ‘locking in’ the exchange rate. You won’t be able to do this for the import duty and VAT payment though: this currency conversion is done by HMRC and you pay in £.
Exchange rate highs and lows and their impact on the cost of 2 example Japanese car imports
The geek in me wants to run through some detailed examples of exchange rate shifts and their impact on car cost. But I think that would make this post too long and dull for those not as into spreadsheets as me.
Instead I’m going to look at 2 example Japanese car imports and the best and worst case scenarios based on historical exchange rates.
These 2 example cars are both arriving in port today:
- One cost 400,000 yen at auction and will cost £5260 on the road in the UK.
- The other 800,000 yen at auction and will cost £8100 on the road in the UK.
Looking at the graph, the highest exchange rate over the last 10 years was 250 in July 2007. The lowest was 120 in January 2012. Interestingly our current exchange rate is pretty much at the midpoint between these 2 extremes.
How would these extremes of exchange rate have affected the costs of the cars described above?
- Our 400,000 yen car would have cost £4350 at July 2007 rates and £7230 at January 2012 rates.
- Our 800,000 yen car would have cost £6461 at July 2007 rates and a whopping £11630 at January 2012 rates.
Shifts in exchange rates are generally fairly gradual, so the estimated price of your imported car would be unlikely to shift as much as these examples over the 2-3 month course of the importing process…….unless we see another drop like that one in 2008. I really hope we don’t!
The drop in the GBP:JPY rate from 195 to 186 seen over the last month would have increased the price of our 400,000 yen car by £160 and our 800,000 yen car by £300.
I’ve written more about how the cost of the car at auction in Japan relates to the UK OTR cost here.
Summary
- No one will be able to tell you the exact price of your Japanese import car until it arrives in the UK. You should at least be aware of this uncertainty if not comfortable with it.
- Japanese car imports involve multiple currency conversions on different dates and (probably) at different rates.
- Large changes in the GBP:JPY exchange rate can have a substantial impact on the cost of Japanese car imports, but these changes usually happen gradually so don’t have such a substantial impact on the estimated cost in a single transaction.
- You can buy currency in advance of needing to spend it to lock in a favourable exchange rate if you’re confident the rate is going to become less favourable.
I hope this all makes sense. Please leave a comment below or get in touch if you’d like to know anything more about the costs of Japanese car imports.
Assumptions
- As I write this post the exchange rate is 186 JPY to the British pound.
- Despite what I’ve told you above about multiple currency conversions on multiple dates, this illustration assumes entire conversion takes place on one day.
- The shipping cost is constant at £650 (the GBP:JPY rate has the most impact on the cost of cars imported from Japan although the GBP:USD rate affects the cost of shipping).
- UK import and Japanese export agent fees are included at typical rates.
- UK transport costs aren’t included.
- Note that throughout this post I’m using the currency market rates. These are higher than you’ll get when making a money transfer through your bank.
