Chancellor Alastair Darling has announced the introduction of a
£2,000 scrappage scheme for cars and vans over ten years old as
part of his 2009 Budget speech.
The scheme will start from next month and will operate until
March 2010. Customers will receive a discount of £2,000 on new cars
and vans bought when a ten year old model is scrapped.
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The model being scrapped must have an up-to-date MOT,
and must have been registered to its current keeper for at
least a year.
The government will provide half of the incentive, or £1,000,
with participating manufacturers providing the remainder.
Industry reaction has been largely positive. The Institute for
the Motor Industry said it hoped the announcement “will provide a
boost to new car sales market and in turn have a positive impact
across the automotive retail industry securing jobs and boosting
consumer confidence in what is a dynamic sector of employment.”
Paul Williams, chairman of the Retail Motor Industry Federation
commented: “The introduction of a vehicle scrappage scheme as
announced in the Budget will boost the new car market, encourage
consumers to get back into car showrooms, and reduce the likelihood
of employee downsizing in this sector.
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By GlobalData“A similar scheme has seen great success in Germany, where new
car sales saw a 40 per cent monthly rise and attracted over half a
million buyers.”
Neville Briggs, managing director of software company Pinewood
noted that dealers could see emphasis shifting from used car sales
– which have been holding up better than new car sales as
car-buyers choose economy over prestige – back to new car sales.
“[Dealers] have a very short time to ensure that they have the best
possible sales and marketing initiatives in place in order to
maximise the opportunities that the scrappage scheme will present,”
he warned.
“Flawed model”
But the BVRLA’s chief executive John Lewis criticised the
details of the scraggape scheme, which he called “flawed”, and
warned the scheme “will damage this country’s used car industry
while boosting imports of foreign made cars.”
Lewis added: “Most people scrapping a vehicle will still not be
able to afford, or access the credit they would need, to purchase a
shiny new car or van.
“Allowing people to buy to a newer, more fuel-efficient vehicle
they can afford would have had the government’s desired impact of
reducing emissions and stimulating the new car and van market, as
this trading-up through the used car market will feed directly
through to showrooms.”
The government has “ignored the close link between the used and
new car markets”, in Lewis’ view, and risks crushing the recent,
tentative recovery in residual values (RVs) seen in the used car
market – causing further pain to fleet companies and finance
houses, which have been hit hard by plummeting RVs.
