The Ford Fiesta - The Big Seller

New car sales in July rose year on year for the first time in 15 months as the Government’s Car Scrappage Scheme encouraged more buyers back into dealerships. Registrations rose 2.4%, the first rise since April 2008 and the Society of Motor Manufacturers and Traders (SMMT) were quick to declare the car scrappage scheme as being the key driver, noting 21% of last month’s registrations were the result of the plan.

Chief Executive Paul Everitt said: “The impact of the scrappage scheme is clear and we are encouraged by the positive impact it has had, increasing new car registrations for the first time since 2008”.

The Ford Fiesta was the biggest seller, continuing the trend of most people taking advantage buying smaller cars because they are cheaper. Registrations of mini segment cars more than trebled in July whilst super-minis saw a 15.7% rise.

Whilst the scheme is only to run until March 2010, or until its £300m budget is used up, lobby groups are calling for the scheme to be extended, noting that the program was earning as much in tax for the government as it was costing them in subsidies.

Similarly in Europe, calls are being made for extensions or for the schemes to be phased out slowly when many run out later this year. The €6bn German plan is expected to run out of cash in September 2009.

Answer Back

Following our previous Car Scrappage article concerning the Times Online claims that manufacturers and dealerships are offering higher interest rate loans for some Scrappage Scheme deals, together with Parkers’ opinion that buyers would be better off avoiding the Scrappage Scheme altogether, the Car Scrappage Team decided to look further into these comments. And we weren’t impressed.

We specifically assessed the Times Online claims regarding Toyota’s Scrappage deal for the Avensis, and after speaking directly to Toyota it became clear the Times hadn’t done their homework. Furthermore, both the Times Online and Parkers’ failed to acknowledge several important factors including the benefits to the consumer regarding a ‘no-deposit’ Scrappage Scheme deal together with the many and varying offers across individual models rather than one ‘blanket’ Scrappage deal. Their analysis was anything but in-depth and generally misrepresented the manufacturer’s and dealerships. So we decided to put the story straight and clear up any potential confusion by publishing our own article. To read the full story click here.

Michael Valvo, the Press Relations Manager for Toyota has kindly provided the following official statement regarding the Times Online and Parkers claims and statements; -

“Toyota provides a range of competitive offers for all customers including those taking advantage of the Scrappage scheme. Different offers are sometimes available to different customers and there can be different terms and conditions but we are always open and fair about what offers are available and to whom, and consistently and clearly communicate the terms of our offers throughout all advertising. In relation to Scrappage specifically BERR are aware of and have approved our approach. ”

Michael Valvo
Press Relations Manager
Toyota GB / Lexus GB
Burgh Heath
Epsom KT18 5UX

The Car Scrappage Team have no affiliation with any manufacturer or dealership, however inaccurate claims and poorly researched statements by third parties need to be addressed so potential buyers are not mislead. The Car Scrappage Scheme is a brave strategy to keep the UK motor industry alive and running during one of the worst economic periods since 1930’s. The Scrappage Scheme financial assistance provided by the UK Government is far less than that being provided by the US and European Governments for similar initiatives. On that basis and in our opinion, manufacturers and dealerships are designing flexible and affordable deals for potential buyers through the Car Scrappage Scheme in very challenging trading conditions.

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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?

Ford Focus zooms to No. 2

New car sales data published for May shows a shift towards the £10k or less tranche of the market in comparison to sales in April.

The Ford Fiesta, available at under £8k thanks to a £2,500 scrappage discount, topped the list for the Month of May, pushing the slightly more expensive Ford Focus down to 2nd place, which with a £4,000 reduction currently retails at under £10k.

Whilst the relatively inexpensive Corsa, Golf and Astra continue to occupy positions 3 to 5 respectively, the equally economical Peugeot 207 now resides at 6th in the table, one place up from April.

Top 10 Selling New Cars for May ‘09
May sales figures in brackets ()

1 Ford Fiesta – (7,040) around £9,795
2 Ford Focus – (6,693) around £12,295
3 Vauxhall Corsa – (5,525) around £10,000
4 Volkswagen Golf – (3,961) around £13,585
5 Vauxhall Astra – (3,549) around £14,865
6 Peugeot 207 – (3,103) around £8,740
7 BMW MINI – (2,650) Mini Cooper OTR Price around £13,715
8 Ford Mondeo – (2,647) around £12,895
9 Nissan Qashqai (2,629) around £12,200
10 Vauxhall Insignia – (2,602) around £17,130

Source: SMMT. *OTR = On-the-road. Above prices may vary so check details and finance with individual manufacturers and dealerships.

Fiesta Zetec - Small is popular!

Further proof of the flight towards the lower-cost market are the new arrivals into the top 10 of the BMW Mini and Nissan Qashqai, which have ousted the Audi A3 and Vauxhall Zafiri. Additionally, the Vauxhall Insignia which had been the 6th biggest new car seller in April now comes in at number 10 and despite a +£4k scrappage discount, currently retails above £13.5k.

New Arrival at No. 7 - BMW MINI

Outside of the top 10 Hyundai, who has made its i10 1.2 Classic available from under £5k, said sales in May rose 36.6% to 3,325 and new orders totalled 9,000. In an average month between 1,200 and 1,600 orders would be taken by the manufacturer.

And the top 10 for June is likely to reinforce this trend towards the less expensive end of the new car market as this will be the first full month in which the Car Scrappage Scheme has been in place.

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Whilst the purchase price of a top 10 best selling new car averages £12,522, it is also worth considering the following rate of car sales per day. The SMMT released UK car sales for May 2009 showing a major fall of 24.8% to 134,858 compared to May ‘08. This equates to an average mean figure of 4,350 car sales per day, which at an average top 10 price of £12,522 gives a total UK car sales figure for May of over £54m per day. Still seems a big number for a recession hit Britain? And this figure does not take into account finance costs, insurance and road tax, which would have probably raised this overall estimate.

The Society of Motor Manufacturers and Traders (SMMT) have revealed UK car sales for May 2009 plunging 24.8% to 134,858 compared to May ‘08. Furthermore, this is the 13th consecutive monthly decline in new UK car sales. Since the 1st January 2009, UK vehicle sales have totalled 748,691, which is down 27.9% year on year.

Top of the Premiership - Fiesta Zetec

The Ford Fiesta notched up the highest sales figures in May of 7,040, closely followed by her big brother – the Ford Focus with 6,693.

The Car Scrappage Team will be analysing May’s sales figures in further detail tomorrow. We think you’ll find it makes interesting reading.

Paul Everitt, chief executive of the SMMT was quick to remind the industry that the month of June will most likely show the true and full picture regards new car sales, as the Car Scrappage Scheme only officially commenced on 18th May ‘09. And Everitt continued by saying “We have seen an encouraging start to the scrappage incentive scheme with 35,000 orders being placed since it was announced, although it will take time to feed into registration figures”.

The Car Scrappage Team was one of the first media sources to report certain manufacturers and UK dealerships setting up their own scrappage schemes prior the official commencement. Moreover, some continue to demonstrate their entrepreneurial skills and fighting spirit by creating their own, highly incentivised initiatives, which are over and above the Government’s scheme.

Full Premiership sales, stats and analysis tomorrow.

Order a new BMW 116i Sport with BMW Select finance now and take advantage of the £2,000 Car Scrappage Scheme discount from BMW and the Government.

Furthermore, BMW are putting in another £1,260 as an additional dealer deposit contribution.

And this all means that no deposit is required from you.

By making 40 monthly payments of just £242.00, you can impress the neighbours for an on-the-road cash price of £17,220. Typical 7.8% APR.

Car Scrappage Scheme - BMW 1 Series

So dream of an Ultimate Driving Machine; The 116i Sport with it’s sexy sport seats, 17″ alloys and 122 hp, which can propel you out of the recession in style.

And not forgetting the class beating fuel efficient 48.7 mpg and low CO2 rating (139 g/km).

You wouldn’t expect anything less.

Click Here to View BMW Car Scrappage Deals

* As with all promotional offers please check full details, terms and conditions and finance with the relevant dealerships.

The offer is available on all Audi models and is in addition to their current offers.

You can drive away a new Audi A3 for a discounted on-the-road retail cash price starting from only £13,655*.

For the Audi A3 1.6 Technik, purchasing through Audi Finance Solutions, a typical finance example over 3 years with 10,000 miles per annum means you make just 35 monthly payments of £226.00*. Typical APR of 7.5%.

Audi state the deal means you pay a total amount of just £14,800.82 – for a new Audi A3!

The 2009 Audi A3

This excellent deal on such an admired lifestyle car includes the £2,000 total car scrappage discount and also a centre deposit contribution of £1,000.

Whether it’s for family, leisure or business, the on-the-road price of less than £15k makes the Audi A3 a deal worth drooling over.

* As with all promotional offers please check full details, terms and conditions and finance with the relevant dealerships.

According to Government statistics, 1 in 5 car sales had been purchased through the Car Scrappage Scheme since commencement on May 18th 2009, which was acknowledged as an encouraging sign by Paul Everitt, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT). “With the scrappage incentive scheme fully operational, the industry is optimistic about the positive impact this will have on the market and on UK production facilities,” declared CEO Everitt, who also added “Despite the current difficulties, the UK must prepare for the return of global growth and government support for the industry is an essential part of the process”. Despite the initial increase in car sales, it will only be in July 2009 when June’s sales figures are released, that the industry could draw a full conclusion as to how effective the Car Scrappage Scheme is having on the UK car industry.

However, Nikki Rooke SMMT’s Head of Communications expressed concerns of emerging issues regarding difficulties in obtaining finance loans for the new car purchase, which was probably being influenced by the global credit crunch problems.

Anxiety continues to spread as U.S. car manufacturing General Motors’ announced that it may declare chapter 11 bankruptcy. Worries are escalating at UK manufacturer Vauxhall Motors, a GM subsidiary, as around 5,000 jobs are now at risk. Rumours are rife about the fate of Vauxhall’s plants in both Ellesmere Port and Luton. However, a deal has now been concluded in Germany where Canadian auto parts maker Magna will take over Opel, another European GM business, which secures tens of thousands of jobs. German Finance Minister Peer Steinbrueck told reporters that the takeover will be financed by a Russian bank in conjunction with Russian automaker GAZ.

We have previously highlighted on CarScrappage.co.uk that despite the entrepreneurial skills shown by car dealerships as they began creating their own scrappage deals while the Government procrastinated, it was essential the UK motor industry received the full support from a diligent Government. One of the main concerns now is whether the Government’s support may fatally prove too little and too late.

Check out Vauxhall deals at http://www.carscrappage.co.uk/car-scrappage-deals.

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.

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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