The UK car scrappage allowance scheme is
making a real contribution to stabilising the new car market. The
SMMT estimates that nearly 10 percent of sales in June went to
scrappage allowance claimants. This helped to keep the year-on-year
decline in total sales to 13.7 percent in June, the lowest annual
drop since July last year.
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Comments made to Motor Finance by the
Department of Business Innovation & Skills (BIS) have clarified
how scrap allowance deals can be marketed in conjunction with
point-of-sale finance promotions. It now seems that BIS is happy
for subsidised finance to be offered as an alternative to the
scrappage bonus.
The terms of the scrappage scheme are laid down in
standard contracts between BIS and the participating dealers, and
not by statute. These terms state that the allowance has to be
offered across the model range, and in addition to other
promotions, if at all. However, “other promotions” now appears to
refer to price discounts only, not subsidised finance.
A recent daily press advertisement by Citroën
illustrated the possible compliance issue on finance. It advertised
the C1 Splash model at “£6,995 with £2,000 Scrappage allowance
deducted”. It then quoted “5.9% APR with NO DEPOSIT on selected
models where Scrappage allowance not claimed”, followed by a
reference to “9.9% APR typical”.
Callers to the advertised Citroën helpline are
referred to local dealers for further queries on this scrappage
offer. As will often be the case within a franchise network, there
is a degree of variation among the participating Citroën dealers.
Some offer better terms than the minimum commitments in the
manufacturer’s promotion.
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By GlobalDataOne dealer confirmed that the 5.9 percent APR offer
was an alternative to the scrappage allowance, and that both would
not be available together. However, another said that on a similar
model, available for earlier delivery than the C1 Splash, 5.9
percent finance would be offered together with the scrappage
allowance.
Discretionary promotions
A BIS representative for scrappage scheme
enquiries commented: “There is nothing wrong with this Citroën
advert. While we insist on the minimum price discount of £2,000
where the £1,000 government contribution is claimed, other
promotions are at the discretion of manufacturers and dealers.”
BIS confirmed that even a more obviously
subsidised finance rate such as zero percent could be offered as an
alternative to scrappage bonus.
There remains the quite separate question of
whether such alternative offers will fully comply with the consumer
credit advertising regulations. That could be questioned, given
that the advertised finance rate appears conditional on the
customer not taking the price discount.
As noted in an earlier Motor Finance
report, however, some legal opinion maintains that this problem
does not arise under the scrappage scheme. For wherever finance is
taken, the allowance can be documented as a dealer contribution to
the deposit rather than a price discount.
Since the scrappage allowance is only a temporary
scheme, some such compliance issues may never have time to
crystallise in practice.
