£2,000 car scrappage scheme – bad news for the British car industryPosted: April 22, 2009
The British Government has today announced a £2,000 car scrapping scheme for people that choose to buy a new car and scrap their old vehicle.
How it works
From next month until March 2010 motorists to get £2,000 discount on new cars if they trade in cars older than 10 years
• The government will provide £1,000 with the industry expected to provide the other half
Whilst on the face of it, this is great news for anyone with an old car looking for a new one – there are huge long term negative effects for the car market and the consumer.
The Irish Government announced something similar a few years back offering people €1000 to scrap their old car against a new one. The following problems now seen in the Irish market will I am sure be reflected here within the next 5 years.
1. With fewer (over 10) year old cars on the road now than ever before – the value of these cars have rocketed making it extremely expensive to purchase a ‘cheap runabout’ people will also purchase cheap cars in order to trade them in and scarp them.
2. Car retailers are less likely to cut you a deal on a new vehicle as they first have to absorb the first £1000 themselves and then wait to claim the second £1000 from the government
3. Cars that are 2/3 years old fall into this funny area where they are not worth enough money to scrap them, but are to expensive to purchase as you are not receiving the rebate against them, thereby de valuing the product.
4. As all the old cars get crushed, not recycled it becomes extremely difficult to obtain parts for older cars.
5. It is still increasingly difficult to obtain finance on a new car, no matter how much the discount is – if the banks wont lend then there is no money to spend !
In short, I think that this scheme is not only bad for the car business, but it is also bad for the consumer and the wider ‘old car enthusiasts’ like myself.
This is simply another measure from the British Government to use smoke and mirrors to try and get us to spend our way out the recession they created.