Mandelson - 100,000 more cars & vans

The UK Government has announced it is to extend its Car Scrappage Scheme beyond the original £300m allocation that was initially set aside.

Speaking today at the Labour conference in Brighton, business secretary Lord Mandelson said that the scheme, which is running out of money, would be extended to cover approximately 100,000 more cars and vans.

The scheme was on course to use up its cash allocation way ahead of the February 2010 end date, which was set at the outset of the scheme. However, Mandelson has given the industry a renewed boost with this announcement, commenting: “There are encouraging signs that the economy is picking up. But recovery remains fragile and uncertain, especially in manufacturing and one of its cornerstones, the car industry.”

Unions and Labour MPs have been urging ministers to extend the scheme to help save manufacturing jobs amid concerns car sales would fall sharply without continued incentives to boost demand. Derek Simpson, General Secretary of Unite told the conference that extending the scheme would help Labour “reconnect” with working people. 

A recent letter to Alistair Darling, signed by the EEF, UK Steel, the Manufacturing Technologies Association and British Plastics Federation, warned of the “clear risks” of ending the scheme, noting that demand for new cars could not be maintained without the incentives currently in place.

The 5bn-euro German scheme, the largest of any government, ran out early this month. It encouraged almost two million motorists to scrap their old cars in exchange for new ones.

The US version spent its $3bn allocation in a matter of weeks. The UK, US and German governments have spent a total of €8bn ($11.4bn; £7bn) on similar scrappage schemes.

It is alleged by Parker’s car price guide that potential buyers would achieve a better overall deal by ignoring the Scrappage Scheme’s £2,000 discount by obtaining a more competitive finance deal after selling or trading-in their old car – privately or outside the Car Scrappage Scheme.

Since the Government’s announcement of the Scrappage Scheme terms, manufacturers and dealerships have protested about having to fund 50% (£1,000) of the discount subsidy. However, according to the Times Online and Parkers, manufacturer’s and dealerships now appear to have thought their away around this issue.

Compare and contrast

Toyota typically offer finance deals with rates ranging from 3.9% to 5.9% APR, subject to length of loan, terms and deposit. However, Times Online claims Toyota’s only loan rate through the Car Scrappage Scheme appears to be 8.9% APR.

The Times Online continues by demonstrating that a new 1.8-litre T2 Avensis with an on-the-road price of £16,565 is initially reduced to £14,565 when applying the £2,000 discount. However, the final cost paid by the buyer increases to £17,264 due to the 3 year 8.9% APR loan rate. This results in the buyer paying an extra £699 over the (original) list price.

The Affordable Toyota Avensis

The Car Scrappage Team have no affiliation with any manufacturer or dealership, however not for the first time, we are not convinced by Parker’s claims or Times Online analysis, and would therefore make the following comments;

Firstly, no deposit is required with the aforementioned deal (together with several others mentioned), which were featured and criticised by the Times Online. In the above Toyota deal, a buyer is paying an additional £699 over a 3 year period, i.e. £233 p.a. or £19.40 per month. So for just under an extra £20 a month, you can trade in your old banger and drive away a brand new car paid for over 3 years with no required deposit.

Secondly, if the Avensis is bought outside the Scrappage Scheme, then the list price may be £16,565, but if purchased with finance - which is usually the case, then this will also result in the buyer eventually paying more than the list price. In other words, it’s same outcome regardless of whether the buyer goes through the Scrappage Scheme or not. And this was the case prior to the introduction of the Scrappage Scheme.

The Simple Conclusion

So whichever option a buyer chooses, when buying on finance the overall sum paid will be greater than the list price. Not exactly rocket science!

We spoke to Michael Valvo at Toyota HQ who confirmed that finance was optional, with many deals and terms varying from car to car and model to model – inside or outside the Car Scrappage Scheme.

Car Scrappage.co.uk have been promised an official response from Toyota, which will be posted on this website very shortly.

Look Whose Profitting

The SMMT have said “Unlike most European scrappage schemes, which are entirely funded by Governments, the UK scheme demands an industry contribution of £1,000 to match the Government’s own input. In some cases, where manufacturer’s profit margins are low, they are not able to offer additional incentives, which may still be available on non-scrappage models and this may be reflected in the finance arrangements.”

This may be the case, but as reported here time and time again, that despite trading through challenging market conditions, watching competitors fall into bankruptcy, all while banks are being bailed out by the Government, manufacturer’s and dealerships are cutting very competitive deals with little real assistance from Downing Street.

As highlighted on CarScrappage.co.uk last week, the average UK top 10 selling car is c.£12,500 and lets assume the discount selling price is £10,500. The VAT amount paid by the buyer to the Government is £1,370, while the Government’s contribution is only £1,000. So who’s profitting from the public then?

Nissan New Deals on New Models

In addition to already being signed up to the Government’s Car Scrappage Scheme, Nissan have gone a step further by giving owners of cars between 8 and 10 years old the opportunity of taking advantage of a £2,000 discount when they trade in their old car for a new Nissan.

The manufacturer, which makes over one quarter of all the cars produced in the UK says that to take advantage of the offer, the trade-in vehicle must have been first registered in the UK between 01/08/99 and 31/07/01. However, unlike the Government initiative, the traded in vehicle will not necessarily be scrapped.

Similarly to the Government scheme however, the car must be have been owned by the registered keeper for at least 12 months and have a current MOT certificate.

New Nissan’s available under the scheme are the Micra, Micra C+C, Note, Qashqai and Qashqai +2 and the offer is valid until 30/06/09.