Topping the Scrappage Table - the Hyundai i10

The Society of Motor Manufacturers and Traders (SMMT) has said the UK Car Scrappage Scheme has begun to have a “positive impact” on the industry as the decline in new car sales slowed to its lowest rates for almost a year.

176,264 new cars were sold in June, 15% above the SMMT prediction of 153,000, and new car registrations were down 15.7% compared with the same month last year, a significant improvement on the 25% drop seen in May.

The top selling car in June was the Ford Fiesta, with the Focus second and Vauxhall claiming 3rd and 4th with the Corsa and Astra respectively.

Topping the list of cars sold through the scrappage scheme in June however is Hyundai who sold 3,042 cars, well in excess of Toyota (2,586), Ford (2,066) and Fiat (1,743).

29,796 vehicles have now been sold through the scrappage scheme since its inception on May 18th according to the SMMT, whilst government figures show that some 87,000 orders had been placed up to and including June 21st.

Top Selling Car for June - the Ford Fiesta

Notably, demand for small cars has shot up with the “mini” sector showing 145.4% growth over the year and in addition, “superminis” took a record 37.2% share of the market.

Ian Robertson, BMW Group MD commented: “From the first quarter to the second quarter of the year, there was a stabilisation of a negative trend” following the introduction of cheaper entry models into the scheme for both its BMW and Mini brands.

Hyundai’s UK MD Tony Whitehorn said that “scrappage customers” we generally going for small cars and were often their first brand new vehicle. Hyundai report that UK sales have almost doubled from the same month a year ago, thanks largely to the scheme.

The Department for Business, Innovation and Skills has pointed out that at the current rate, the scheme would be exhausted by the end of October, well in advance of the projected March 2010 end date.

Professor David Bailey, director of Coventry University Business School said that pressure would be on the government to extend the scheme, something which the Business Department is currently “adamant” won’t happen.

Bailey also noted that the car industry wouldn’t properly start to recover until wider confidence and the housing market picks up.

Hyundai stated that its new orders for the period April 23 to June 7 amounted to 8,246, which put the South Korean based manufacturer at the top of the list of the 15 car companies involved in Reuters’ survey.

Leading the way for Hyundai is its entry level i10 model, which is available for under £5,000 with the scrappage discount.

i10 - biggest selling model

All but one of the companies polled claimed that consumers were showing interest in cheaper and more fuel efficient cars, a trend which was back up by the UK’s Society of Motor Manufacturers and Traders (SMTT) who note that since the various scrappage schemes have been implemented across Europe “there’s a tendency to buy smaller cars.”

The SMTT spokesperson noted that the trend was most likely due to a combination of lower CO2 emissions, better mpg and the lower price of these smaller models.

In second place behind Hyundai were Ford, who have 8,050 new car orders for the period, with Toyota just behind with an estimated 7,800 vehicle orders.

The Car Scrappage Team previously published statistics based on their own Scrappage survey reporting consumers were utilising the Scrappage Scheme to pursue the fuel efficient economy end of the market.

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?