Is it the end of the road for 'bangers for cash'?
Saturday 19 September 2009
The Government's car scrappage scheme could run out of cash in October – four months early. It means anyone thinking about taking advantage of the scheme – which gives you £2,000 for your old banger – needs to act now.
The Government introduced the scheme in this year's Budget with the aim of boosting the motor industry and stimulating consumer spending. Under the scheme, motorists who scrap cars and vans registered before 31 August 1999 are given £2,000 towards the cost of a new car, half from the Government, half from the car firm. It is due to end in February, or when the £300m the Government has allocated towards it runs out – whichever happens first.
But the latest government figures show that almost two-thirds of the cash has gone. The figures show that 205,112 cars and light vans have been ordered through the scrappage scheme since it went live in May. With sales continuing to grow, the funding for the scheme could be exhausted by October, especially with the boost to sales produced by this month's new 59 car number plate.
Motor dealers have been delighted by the scheme's success and are demanding it be extended. Paul Williams, chairman of the RMI National Franchised Dealers Association, the trade body for new car dealers, says extending the scheme wouldn't even cost taxpayers a penny, because of the increased cash brought into government coffers through the extra VAT raised. "Because scrappage sales are purely incremental, the VAT earned on them has made it a self-funded scheme. To say the scheme has been successful since its introduction would be a massive understatement. But with the retail economic climate still fragile, an extension of the initiative is vital," says Williams.
Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, agrees. "The scrappage scheme is proving hugely popular with motorists and has provided an important boost to the UK motor industry. The scheme is clearly delivering environmental and safety benefits, in addition to incremental business for UK manufacturing and much-needed demand for retailers," he says.
But Business Secretary Lord Mandelson has ruled out extending the scheme. However, not everyone is in favour of the project. Ed Bowsher of consumer finance website lovemoney.com says: "Yes, the car scrappage scheme has boosted car sales, but I still don't believe it was a prudent use of government cash. Eight out of 10 cars sold in the UK are manufactured abroad, and only one of the top 10 UK best-sellers is made in the UK – the Vauxhall Astra. The only real beneficiaries of the scheme are car dealers, but why do they deserve government support ahead of many other struggling businesses?"
Putting that aside, the scheme has boosted the value of second-hand cars, according to CAP Motor Research. It says prices have risen by up to 30 per cent this year, leaving the average family saloon now worth £600 more than it was in January.
The scheme has also uncovered one or two old classics that have been languishing unused in garages and is set to give them a new lease of life. Typical is a 1958 black Morris Minor (pictured) which was traded in towards a new Hyundai Coupé in Gatwick. The black two-door Minor is described as being in "museum-quality" condition by one independent expert and is set to be used as a display in a museum.
If you are in the market for a new car, then the scrappage scheme could clearly help cut the cost of your new vehicle. However, before signing up to the scheme, it can be worth looking at other deals or discounts that may be on offer, says Joe Pattinson of BMW Group Financial Services. "I would advise customers to check the terms of any finance offer including scrappage, as there may be other offers available which are better under certain circumstances."
Indeed, anecdotal evidence suggests that calling up a car dealer and telling them you're a cash buyer wanting to snap up a motor right away may encourage them to make you an offer that is more attractive than a scrappage deal. If you can't get a discount, you could try to persuade a dealer to throw in some accessories such as new car mats or six months of road tax.
It does seem that people leave their sensible heads behind when shopping for cars, as more than two-thirds of motorists admit they don't do any research at all on the finance deals available. According to an Esure poll, only 13 per cent of motorists spend more than a couple of hours finding the most suitable finance option before signing on the dotted line.
Motorists also choose the easiest option when it comes to car finance, which can prove to be a costly mistake. One in seven says they took out dealer finance when buying their last car, one in 10 used a personal loan, while around one in 20 just swiped their credit card for the full amount, which undoubtedly ending up costing them more than it needed.
Whether or not you use the scrappage scheme, finding the right finance is a must.
Trading up: How the scrappage scheme works
The Government provides a £1,000 incentive, which is matched by vehicle manufacturers, for consumers to replace their 10-year-old or older vehicle with a new one. The old vehicle must be a car or small van and have been registered in the UK to the consumer for at least 12 months. The scheme applies to commercial vans (up to 3.5 tons) as well as cars that are 'T' registration or older.
The scheme will last until February 2010, or until the government funding has been used. Funding is available to scrap up to 300,000 vehicles, with 205,112 signed up by 6 September.
To take advantage of the scheme, you need to contact your local dealer to ask if they are operating it. Some 41 motor manufacturers have signed up, so most dealers should say yes. They will check your vehicle and the new vehicle you want to buy to ensure both meet the rules of the scheme. When the sale is agreed, the dealer will sort out the paperwork and arrange for your vehicle to be scrapped. The discount is deducted from the price you pay for the new vehicle and will be shown on your invoice when you take delivery of your new vehicle.
'I traded in my old Ford Mondeo for a sporty new BMW'
"The scrappage scheme came at just the right time for us," says Lyn Butler. "I took voluntary redundancy earlier this year from a job in the trucking business where I had a job with a company car. I needed to get a new car to drive to my new job and the scheme meant I could trade in the family's old Ford Mondeo," says the 44-year-old from Preston, who now works as deputy director of HR at her local university.
"I'd had a BMW at my old job, and trading in the 12-year-old Mondeo for scrap meant I could afford a new BMW 116i Sport. It was £18,500 but cost only £16,500 through the scheme, and I've arranged to buy it over three years through a BMW Select finance agreement, which comes with 12 months' warranty.
"If it hadn't been for the scrappage scheme, we would have ended up buying a second-hand or as-new car."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Singer was ordered not to 'blow her rape whistle' in song 'Vegas'
Mr and Mrs Smith star admits she's 'never been comfortable on-screen'
Co-creator Mark Gatiss dropped some very intriguing hints ahead of the BBC drama's return next year
It is a crazy place to play in summer, writes Paul Scholes
It was all about Liz’s cocaine-fuelled brainwave, 'The Metwork'
Money round-up video: Paying for Christmas, savings cheats, rising inflation hits home and bargain books
Buyers beware of new-build home headaches
How not to go into the red over Christmas
Mark Dampier: Strong returns can be found if you go the opposite way to the crowds
The Cyprus dream becomes a nightmare
- 1 American-born Boris Johnson refuses to pay hefty US tax bill
- 2 Lee Evans announces his retirement from comedy on The Jonathan Ross Show
- 3 John Smid: Former leader of US ‘gay cure’ group has just married a man
- 4 These grandmas smoking weed for the first time are wonderful
- 5 Pastafarian former porn star Asia Lemmon allowed to wear colander in driving licence photo
'Muslims pre-date Columbus in discovering America,' says Turkish president Erdogan
Rochester by-election: Ukip gains second MP as Tory defector Mark Reckless holds seat
France 'blocks' Russian sailors from boarding a warship
Former Tory PM Sir John Major says 'we would not have an NHS without migrants'
Rochester by-election: Labour MP Emily Thornberry resigns after posting white van and England flags tweet
G20 summit: David Cameron warns Vladimir Putin that Russia's relationship with the West is at a 'fork in the road' over Ukraine
iJobs Money & Business
Voluntary Only - Expenses Reimbursed: Reach Volunteering: Age Concern Slough a...
Voluntary Only - Expenses Reimbursed: Reach Volunteering: Crossroads Care is s...
£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens