Australia EU Free Trade Agreement – Lower Prices for Euro Cars, Machinery, Boats.

The Australia EU Free Trade Agreement (FTA) is a trade deal between the two markets to remove most tariffs on imports and open export markets. With fuel prices and the Middle East crisis dominating the news cycle, this FTA announcement probably went unnoticed by many Australians. But it is an announcement that should be of interest to anyone considering buying cars, boats, motorcycles, equipment and other goods from European brands in the future.

Currently there are tariffs or import duties on almost all goods coming into Australia from European Union countries. These tariffs and duties are paid by the company importing the goods. This is usually the Australian branch of the Euro company, a dealership, or their Australian agent. This duty then flows through to the price that is charged to consumers. Consumers don’t pay this as an additional charge on top of the purchase price. It is factored in as the goods go from the importer to possibly a wholesaler and finally to the dealer for sale to customers.

Many European countries are home to some of the world’s most luxurious and aspirational brands. But also to some well-priced and extremely popular makes of cars and other goods. The FTA may bring many of these makes and models into the affordability zone of more buyers.

In the motor vehicle market, while the FTA will see some reductions, the Luxury Car Tax (LCT) still remains on some vehicles. But tweaking of this tax is part of the agreement with the LCT thresholds on EVs lifted.

While the Prime Minister Anthony Albanese and Trade Minister Don Farrell announced the completion of 8 years of negotiations, the final details and commencement date is yet to be confirmed.

What is the Australian EU Free Trade Agreement?

A Free Trade Agreement, or FTA, is a deal negotiated between countries to allow imports and exports to be traded with duties. Australia has imposed a 5% duty on European goods and the EU has restrictions and tariffs on some Australian products. This new agreement removes most of these duties.

The negotiations started 8 years ago, in 2018, but agreement was only finally reached in March this year. It is expected that approximately 98% of products imported into Australia from European Union countries will now be exempt from a trade tariff.

Australia also imposes a Luxury Car Tax on vehicle imports above a certain threshold. Thresholds are adjusted each financial year. Crucial to negotiations was easing of the LCT. When the FTA comes into effect, the threshold for LCT on zero emission vehicles will be increased to $120,000. Making many EVs from luxury brands more affordable.

What Buyers will Notice with EU Free Trade Agreement

Buyers of European brands in many sectors – food as well as cars, bikes, boats, equipment and machinery may notice changes to pricing of new goods after the FTA is implemented. The motor vehicle market is a key sector, and buyers may have access to better pricing on many European branded cars. FCAI Tony Weber said that the FTA was welcomed as it brought the EU market in line with tariff-free Asian markets, the largest source market for cars in Australia.

Brands to start adding to your wish list may include Audi, Lamborghini, Porsche, Peugeot, Mercedes-Benz and BMW for starters. The LCT

component of the FTA sees the threshold for this tax on EVs increased. This would remove both the tariff and LCT on many models including the BMW iX3 and VW ID.Buzz GTX.

Motorcycle brands which may have new model prices reduced include Moto Guzzi, BMW Motorrad, Ducati and Aprilia. Boating enthusiasts may also be in for a welcome reduction on some models from brands such as Beneteau and Jeanneau. While businesses in agriculture and construction may see prices reduced with tariffs removed on brands such as Deutz-Fahr, Liebherr and Claas.

The removal of tariffs will apply to new goods entering the country after the implementation date. Models currently in showrooms will already have had the tariff applied and as such no change in price would be expected. The second-hand market would also see no change when the FTA is introduced.

Will EU FTA change finance and interest rates?

The introduction of a free trade agreement between the European Union and Australia will not result in changes to credit products or interest rates. Trade policy does not determine credit facilities or interest rates. Rates offered by lenders are influenced by RBA decisions.

Loan options for cars, boats, motorcycles and equipment, and our competitive interest rate financing will not be impacted in any way when this agreement is implemented. Buyers may however realise a benefit with financing if a lower loan amount is required to make their purchase.

Lower prices can mean less finance is needed. This may play out with lower repayments and depending on individual applications, possibly a lower rate offer. Buyers keen to start planning their possibilities can work up loan estimates with our Car Finance Calculator. When the start date for the FTA is announced, consider applying for conditional loan pre-approval to know exactly which model you are in a position to purchase.

To take advantage of potential lower priced goods when the Australia EU Free Trade Agreement is implemented, request a finance quote from Jade Finance.

DISCLAIMER: NO LIABILITY IS ACCEPTED IF ERRORS OR MISREPRESENTATIONS ARE FOUND IN THIS ARTICLE. THE ARTICLE IS PREPARED AND PRESENTED FOR GENERAL INFORMATIVE PURPOSES AND IS NOT INTENDED TO BE THE SOLE SOURCE OF INFORMATION FOR MAKING FINANCIAL DECISIONS. THOSE REQUIRING GUIDANCE AND ADVICE SHOULD CONSULT A FINANCIAL ADVISOR.