So far some 330,000 have been ordered under the scheme. However, with a limit of 400,000 vehicles which can be scrapped, a further 70,000 people could still take advantage of the deal.

The Government have said that manufacturers had requested the extension until the end of March 2010 to allow them to prepare for the exit phase. However, there will be no additional financing for the scheme, which is funded by the Government and 38 car manufacturers.

Mandelson said: “Against the background of the economic downturn the scrappage scheme has proved a great success, driving UK car sales, protecting jobs and supporting the supply chain manufacture at a time when this sector needed it most.”

The Society of Motor Manufacturers and Traders (SMMT) says the scheme has accounted for a fifth of new car sales since it was introduced, but warns of a tough year once it ends.

Of the 158,082 sales last month, 21.6% were attributable to the car scrappage scheme, which is due to end in February or when funds run out, whichever is sooner.

CEO of the Society of Motor Manufacturers and Traders (SMMT) Paul Everitt, said: “The increase in new car registrations in November reflects the positive impact of the scrappage incentive scheme, customers avoiding the VAT increase in January and the very difficult conditions that we experienced a year ago.”

After Business Secretary Lord Mandelson said last week that the industry would have to cope with returning to normal market conditions, Everitt urged the Government to consider extending the scheme in its Pre-Budget report on Wednesday, noting that there was just an estimated £125m of funding remaining.

The November figures took new vehicle sales to more than 1.84m for the first 11 months of year, but this represents a drop of 8.8% on the same period last year. Full year estimates are for 1.95m sales versus 2.13m in 2008.

RAC motorist strategist Adrian Tink said: “We are still concerned about what will happen once the scheme ends and the discount bubble burst.” 

Edmund King, president of the AA noted of the new cars purchased through the scheme: “These cars are cleaner, greener and safer”, whilst making reference to a recent poll suggesting 13% of drivers would consider buying a new car if the scheme was extended.

UK manufacturing leader at Deloitte, David Raistrick said: “We may see interest rates increase next year. Furthermore, car manufacturers may find themselves needing to implement price rises due to the low value of sterling increasing the cost of imported cars and parts. The automotive sector must be prepared to deal with these challenges in order to ensure a long-lasting recovery.”

Sales rose to 1,388,136 as a result of double digit increases in four of Europe’s biggest five markets, with Germany leading the way in percentage terms and the UK in volume.

The European Automakers Association (ACEA) reported that Germany saw a 21% increase in sales, lifting volumes to 316,166 in the month while the UK hit 367,929 new registrations, representing an 11.4% improvement. Spain meanwhile shifted 77,374 units, reflecting an 18% hike with France also up, 14% to 183,110.

The governments of all four countries have actively supported car manufacturers by offering car buyers car scrappage incentives and discounts worth thousands of euros/pounds if they trade in their old cars for newer, more fuel efficient models.

Sales Plunge In Non-Scrappage Scheme Countries

In contrast, in countries where such car scrappage schemes have not been in operation, car sales have been hit hard by the recession. Ireland suffered a 34.7% drop in new car registrations in September, whilst Romania new car sales dropped a hefty 74.5%.

For the full year however the picture is different across Europe, with overall new sales down 6.6% to 10,946,161. Only the first few countries to run car scrappage schemes have seen an increase in sales for the first nine months of the year, with new registrations up 26.1% in Germany, 6.7% in Austria and 2.4% in France.

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.

The EEF has recently issued a letter to the Chancellor Alistair Darling claiming the Car Scrappage Scheme had helped reduce the fall in UK car production while retaining skilled jobs. Director of policy, Steve Radley confirmed; “The success of the Car Scrappage Scheme has been clear for all to see by putting a floor under manufacturing recession and helping retain skilled employees.”

However, a caveat was also included – as the EEF stated it was uncertain consumers would continue with their demand for new cars if such scrappage incentives were to cease. It further added; “It is by no means certain that this positive trend will continue in the near future with consumer confidence still fragile and unemployment still rising. Failure to extend the (Car Scrappage) scheme before a stronger recovery is in place runs the risk of pulling the rug from under the sector, damaging supply chains and prospects for a better balanced economy in the upturn.”

As recently reported by the Car Scrappage Team, the Society of Motor Manufacturers and Traders (SMMT) has also called on the Government to extend the scrappage scheme. The SMMT was quoted last month as stating the £300m scheme fund was likely to run out by the end of October and has therefore called on the Government for an extension to February 2010. But a more startlingly estimation has been offered Deloitte, which claims the scrappage scheme fund could be all-but-gone within the next week.

Mandelson - No Promises

“If the scheme ends in October and is followed by a 2% increase in VAT in January it will be a serious blow to the British car industry that’s just getting back on its feet.” warns Paul Everitt, CEO – SMMT.

Executives from the motor industry met with Business Secretary Lord Mandelson last week and called for an extension to the Car Scrappage Scheme by increasing the Government provided subsidy by a further £200m. The initial Government sum which kick started the Scrappage Scheme in May was £300m and is forecast to run out in October.

The industry is warning that failure to provide further subsidy may result in workforces being forced back on to shorter working weeks with job security at risk.

Paul Everitt, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT) was quoted to have said “Without an extension there’s a real risk of an abrupt slump in sales that will create further uncertainty for thousands of car workers with the likelihood of short-time working.”

A Department of Business spokesman confirmed a meeting was to take place, but said there were no plans to extend the Car Scrappage Scheme.

Since the Car Scrappage Scheme was launched in April 2009 around 200,000 new cars have been bought, which has helped to sustain employment within and connected to the motor industry.

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.

The BMW Mini - Major Sales

Year-on-year new car registrations fell by nearly 16% in June, compared to the 25% fall in May. However, the Car Scrappage Scheme has started to have a positive affect on the UK motor industry with this fall in sales being the smallest since July 2008.  

The Society of Motor Manufacturers and Traders (SMMT) confirmed 176,264 units (cars and vans) were sold in June, with the Scrappage Scheme, which commenced on 18 May, accounting for approximately 10% of these sales.

Interestingly, private buyer registrations increased 3.9% year-on-year – recording the first rise since November 2007.

The SMMT also confirmed 29,796 vehicles had been sold under the Car Scrappage Scheme since commencement, while Government statistics state that c.87,000 orders had been placed up to 21 June 2009.

As predicted by the Car Scrappage Team, buyers have used the Scrappage Scheme to purchase the smaller, fuel efficient cars, with the “mini” market achieving 145.4% growth over the year and the “super-mini’s” making a record 37.2% share of this market.

Having initially planned for the scheme to last until March 2010, the Department for Business, Innovation and Skills stated that the Scrappage Scheme would effectively be exhausted by the end of October based on the current buying rate.

Industry experts and car dealers have petitioned the Government to extend the scheme as has been done in Germany. However, at present the Government department has no plans to extend it.

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.

HAVE YOUR SAY, POST A COMMENT

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?