Unique Auto

Posts Tagged ‘scrappage scheme’

Over recent years the used cars for sale sector has witnessed a drop in the amount of cashflow that is made. Used car figures were actually down by around £24 billion for the 2008 year, there were around 300k less cars sold then the previous years.

We all know that this was due down to the credit crisis that struck the whole world late in 2008. People began to panic and control their money and one thing in life that people could afford to cut down on was purchasing a car and we all know that the huge majority of people chose to drive a used car because they can get more value for their money.

Therefore what happened in 2009? And why is the used car market still suffering? Well I think that this all boils down to the vehicle scrappage scheme. Although it has been good in boosting the new car market, it has left the used car market trailing behind, the reason for this is as follows.

When people want to purchase a new vehicle,they in most times put their old one for sale, this then gets sold to a new driver who then passes it on once they gain experience. But because of the scrappage scheme people are rather choosing to hand it in to a participating garage and getting themselves a brand new car.

I do expect the used car market to get back on its feet in 2010, as the scrappage scheme will not last forever I mean in the end its the government who are funding it and it has probably already costs millions of pounds to save the new car market, but on the other hand it has hurt another market even worse.

Do you want to Buy an Audi or Buy a New Mercedes

Earlier this year in May, the UK government launched a scheme for scrapping old cars that rewarded new car buyers. 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.

600 million pounds was the total price to run the scheme. 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. Despite this being a large sum to invest in a scheme, it’s certainly proving successful for the market.

The total number of registered cars for July 2009 were released last week and it seems to have risen by 2.4% compared to the same month last year. Overall 157,149 new cars were registered last month, overall a 2.4% rise in sales from last July. Out of the overall cars registered, over 33,000 of them were bought alongside the scrappage scheme. The last sales rise seen was back in April 2008, so although 2.4% is not a huge number, it’s still a number to be happy about.

Because the scheme has resulted in good news for the motoring industry, many MPs are calling for the scheme to be renewed for 2010. Currently the scheme is due to end either when the tax payers money input runs out, or in February 2010. With around 144,000 new cars registered with the scheme since it started, I wouldn’t be surprised if they continued it into 2010.

Car retailers will be hoping that if the scheme is kept going, the amount of cars being registered will continue to rise.

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

Due to the majority of people buying new cars, leasing companies are missing out as people are not going for a Nissan lease when they can just scrap their older car for savings off a new one. Luckily, this problem doesn’t so much effect 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 guilty about driving used cars that may not be as good for the environment as brand new ones are claiming?

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 cash incentive offer is really up to you, there can be no Green-guilt. 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 most probably 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.

After the end of June, Ford are raising their prices by on average 4% for new car buyers. This is the third time since 2007 that they have rose their car prices. The first rise was in February by 4.7%, and once again in April by 3.75%.

Ford admitted that is was strange to raise prices during a recession, however, they said “there is no choice if we are to maintain a viable business”.

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

Ford had now other choice but to raise prices because the majority of the UK cars are constructed in Germany and Spain. Before these prices rises occurred, Ford had to absorb the losses from the weak pound, however, they cannot continue doing this during a recession if they wish to be a stable business.

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 the prices of all Fords cars, including the Ka, Fiesta and Focus, rising by around £600 – £750. 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 isn’t so much good news for new car buyers, but it’s not as bad for leasing customers.

Even though the idea of the scrappage scheme was good, buyers that are using the grant are loosing out because car dealers are not offering the same low price deals that they offer to anyone else.

The new scrappage scheme is where the government gives you a £2,000 grant towards a brand new car if you scrap a car that’s 10 or more years old.

Not all buyers will lose out on the deal. Only customers that take out a car manufacturer loan to pay for the car over a series of years. The way they will be loosing out is because the car manufacturers who offer loans that have interest rates as low as 4.0%; they are choosing to charge customers on the scheme up to 10% APR. This means that it’s cheaper to sell your car privately and get a lower APR.

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%, based upon a series of factors. However, they have decided now that they are only going offer an 8.9% rate to customers that are part of the scrappage scheme. This means that is you were to buy a T2 Avensis, with the scrappage scheme it would set you back £14,565, however, once you pay off the loan you would have payed just over £17,200 which is almost £700 over the retail price.

Ford and Seat are 2 more manufacturers that are increasing their rates for scrappage scheme customers. When buying a new Ford, they normally offer a 3.9 APR, but if you are buying a new car with a scrappage grant, you only get to choose from the 7.9 APR that they have available. Seat is the worse of the 3, their loans normally carry a 0 APR, however, if you are part of the scrappage scheme, you will have to have a 8.9 APR.

This problem has come about because the government is making the manufacturers pay half of the bill rather than the government paying for the entire scheme. This has left many annoyed and left having to try and find the money somewhere else, and this is how they are doing it.

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 alternatives to buying your own 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 think about the other options when it comes to buying a new car before you scrap your old one for £2,000.