The plea comes after the dealer announced half year profits of £8.6m, down from £13m last year. “The car scrappage scheme has helped, and we would like it to continue into next year” said CEO Ken Sturgeon, adding “We have around 3,500 orders from it so far, 55% of which has been delivered.

Revenue at the dealer for the 6 months to June 2009 came in at £870m, down from the £1bn reported for the same period last year. Lookers said the scheme had helped performance but that it remained cautious regarding the outlook for the new car market.

Sturgeon noted that whilst demand for new cars was down, “used cars, parts and after-sales are going really well.”

The Car Scrappage Scheme which launched in May of this year is due to end February 2010, or when the £300m put aside by the government for the scheme has been used up, whichever is the sooner. A 2.4% year on year rise in July of new UK car sales has been largely credited to the scheme.

However, over the half the funds have been used up already, suggesting the scheme will end later this year at the current run rate, several months short of the original expected end date.

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?

Retirees are flocking to showrooms having thought through the economics and opportunities on the UK forecourts. Trevor Finn, CEO of Pendragon has said the large proportion of interest in the scrappage scheme was coming from retired motorists. One Citroen dealer last week reported over 70% of scrappage scheme enquiries coming from the older driver. Pendragon believes that this is the emerging trend.

Trevor Finn went on to confirm -  “A high proportion of the people who have applied are people who are on fixed incomes, particularly retired people who have had cars for a long time and are paying in cash.” The ecomonics are such that the retired demographic consider the scrappage scheme’s £2,000 subsidy to offer better value when compared to the current low return achieved on savings accounts and the poor and volatile performance of equity investments. Baby boomers are saying ‘Live the dream, buy the car’.

Pendragon’s Finn went on to confirm that he believed the car scrappage scheme is starting to drive showroom enquiries.

Dealerships have already begun selling the scrappage vehicles to scrap merchants, with Cartakeback manager, Graham Price saying “The indications are that several thousand cars have been pre-sold under the scheme.” Cartakeback handles the transfer of scrappage vehicles between car dealers and scrap yards, and is estimated to deal with around 70% of the scrappage volume during the scheme.

Car Scrappage Panic

Car buyers planning on purchasing new cars through the Government’s Car Scrappage Scheme may find they’re unable to drive-off the forecourts when the scheme goes live on Monday 18th May, due to a VAT row between manufacturers and the Government.

Manufacturing bosses are claiming the Car Scrappage Scheme has plunged into chaos due to a Government error with the scheme’s details. Motor industry leaders are saying this weekend that some manufacturers may delay joining the scheme having failed to reach agreement with the Government. The dispute is apparently affecting all 39 carmakers who are signed up to the scheme.

The cost of the Car Scrappage Scheme is being split between the Government and the motor industry, however the Society of Motor Manufacturers and Traders said: “The dispute probably means some manufacturers will not be able to deliver vehicles to customers on Monday. We are seeking clarification about the VAT split between manufacturers and dealers, and how it is administered.”

The Department for Business insisted that manufacturers who had signed up to the scheme were made very clear of the terms and conditions.

The very latest Car Scrappage Scheme Survey is revealing over 50% of those surveyed and interested in the scheme are serious buyers.

Nearly 75% of those surveyed are looking to trade in their old motor for a new £10,000 or below model. It would appear dealerships offering attractive deals on the fuel efficient lower end market stand to increase sales.

However, it appears that the scrappage scheme is not just limited to the cost effective end of the market. Just over 23% of potential consumers are considering utilising the scheme to fund the purchase of vehicles in £10k – £20k range -the larger engine higher specification models.

The UK consumer is evidently working the numbers to their advantage. And why not say the Car Scrappage Scheme as they have little to lose in purchasing a new car through the scheme. But cynicism has recently arose from various quarters of the media claiming that some UK dealerships are including previous sale discounts as part of their portion of the scheme’s £2,000 subsidy. Therefore, the price of showroom models are only being reduced by a further £1,000 – as provided by the Government. However, UK consumers are savvy folk and will use all their social networks and resources to compare prices across dealerships. We would say – ‘Do plenty of research before jumping in’.

The Car Scrappage Scheme begins on Monday 18th 2009 and we anticipate an increase in internet and showroom enquiries.

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