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Posts Tagged ‘scrappage scheme’

Back in May, the Government launched a scheme that would reward car buyers when they scrappage their old bangers. Oddly enough it was called the ‘Car Scrappage Scheme’ and it gave car buyers 2000 towards a new car when they scrapped a car that’s more than 10 years old.

The overall cost for the scheme was 600 million pounds. Out of the total pot required to fund the scheme, half was payed by the tax payer, the other half was payed for by the car manufacturers. Even though this is alot of money, it seems to be paying off for the economy.

The overall amount of new registered cars for this July was announced the other day and they showed a rise of 2.4% compared to July last year. Overall, 157,149 new cars were registered in July, making a 2.4% on July 2008. Over 33,000 of the total cars registered were bought as part of the government’s scrappage scheme. Although a 2.4% rise is not a huge number, it’s still good news because it’s the first rise in car sales since April 2008.

Due to the good results the scheme has created, many MPs are looking to extend the scheme for throughout 2010. The scheme is currently set to end by February 2010 or when the tax payers 300 million runs out. With around 144,000 new cars registered with the scheme since it started, I wouldn’t be surprised if they continued it into 2010.

If the scheme is continued, car manufacturers will be hoping that the rise in cars registered will continue as more people buy into the scheme.

Although this is good news for the new car industry, there are some downsides for other sectors. The second hand car market is the first one to be effected. Due to the large number of cars being scrapped, the amount of second hand cars on the market are being reduced. The second problem occurs with the cheap car leasing market.

Because many people are opting to buy a new car rather than lease, many leasing businesses are loosing out as people choose not to go for a Nissan lease when they could just scrap their old car and get more money than it’s worth off a new car. This problem doesn’t so much affect the van contract hire sector which doesn’t yet benefit from the scrappage scheme.

Unless you have buried your head under a rock for the past few months you will be aware of the Government’s latest initiative to kick start the car market, whilst also raising awareness of ‘Green Issues’. This incentive scheme has been referred to as the Scrappage Scheme and has already proved to be successful in terms of increasing the number of new cars sold in this country. The general public have literally flocked in order to get rid of their old bangers and take advantage of the up to £2000 cash incentive towards a new car.

However, there is one small problem; even with the £2000 contribution from Government and the Dealership, a lot of families still can’t afford to splash the cash on a new car. The Government are really pushing their Green agenda, primarily concerned with getting old and environmentally unsound cars off the road. The remaining concern is that new cars are still vastly more expensive than used cars so the used will continue to sell well.

But shouldn’t we feel garguantually guilty about driving used cars that may not be as good for the environment as brand new ones?

The answer is simply No. Most cars made in the past 10-15 years are just as ‘Green’ as their 2009 counterparts. I have been driving a Used Audi for a few months and the Miles per Gallon ratio is identical to the new model, 4 years its junior.

So the choice of whether to take the Government up on their Scrap offer is really up to you. If you want a new car then it makes sense to trade in your old 10+ year model, but if you are interested only buying a Used Car, then by all means do that. It is no less Green to recycle an existing car. In fact, the manufacturing process to make the new car in all probability offsets the carbon emissions you would have prevented. So essentially, the whole scheme seems like a bit of a paradox; or a waste of time, tax-payers money and guilt.

The prices of Ford cars will be rising after the end of June by on average 4%. This is the third time since 2007 that they have rose their car prices. Ford rose their prices back in February by 4.7%, Ford then rose prices again in April by 3.75%.

Ford stated that it does sound strange to raise car prices during a recession, but they also said that they had no choice because of the weak pound, “there is no choice if we are to maintain a viable business”.

Ford said that at the end of 2007 the pound had been stable against the euro for 10 years at 1.43 euros, however, due to the recession, over the past 2 years, the pound has dropped to 1.16 euros.

Because Ford build their UK cars in Spain and Germany, Euro countries, they had no choice but to increase prices. Before these price rises, Ford had been absorbing the losses which end up around £3,500 for every vehicle sold, however, they cannot sustain this if they plan to keep a stable business, especially during the recession.

Not only are these price hikes a problem during the recession but they also have an affect on the governments car scrappage scheme because these price rises will take a huge chunk out of the money that would have been saved. With prices of a Ford Fiesta, Focus and Ka increasing by around £600. New car buyers won’t be benefitting as much when buying a new Ford under the car scrappage scheme.

Although this is all bad news for new car buyers, people choosing car leasing over buying won’t see the price rises straight away. Even if you are not currently on a Ford lease, but you are looking, the leasing companies won’t pass on the price rises until they buy new vehicles, which, during the recession, won’t happen straight away. So this is some good news for the leasing customers, not so much for new car buyers.

Although the initial idea of the car scrappage scheme was a good idea, buyers entering their scheme may be loosing out because car dealers are not giving them the same low price deals available to everyone else.

If you are unsure of what the scrappage scheme is, it’s where the government gives you a £2,000 grant to scrap your old car if it’s 10 years or older.

Not all buyers will lose out on the deal. Only ones that take out a loan with the manufacturer to pay for the car over several years. Car scrappage scheme customers will be loosing out because the car manufacturers who offer loans with rates as low as 4.0%, they are charging customers on the scrappage scheme up to 10% APR. This means that you can get a new car cheaper by selling your old car seperately and get a lower APR than go into the scrappage scheme.

Toyota is just one manufacturer that is increasing their percentage rates for their customers who are part of the scheme. Toyota has loan deals available with rates between.9 and 5.9%, due down to the length of the loan. However, they have decided now that they are only going offer an 8.9% rate to car scrappage scheme participants. This means that if you were to buy the new Toyota T2 Avensis, it would cost you £14,565 with the scheme, but once you pay off the loan, you will have payed an extra £2,699 which is almost £700 over the standard retail price.

Seat and Ford are also car manufacturers that are doing this to their customers. Ford normally offer a 3.9 APR, however, if you are buying your new car as part of the scrappage scheme, you have to take the 7.9 APR that they have to offer. Seat tends to be the worst, they normally offer a 0 APR, however, now if you are on the scrappage scheme, they will only offer you a 8.9 APR.

The reason this problem has come about is because the government has made the car manufacturers pay for half the bill of the scheme. This has left many manufacturers annoyed and having to try to find the extra cash somewhere else, and it seems that they have found where.

It now seems that it would be more beneficial to sell your car seperately rather than participating in the new scrappage scheme. However, there are a range of alternatives to buying a brand new car. Contract hire is a method of owning a car that is often overlooked. By taking out a Ford lease you can get the latest cars at cheaper prices.

So before you go out and scrap your car as part of the scrappage scheme, look into the other options that could save you some money.