The Chancellor has accounced a car scrapping incentive in his budget speech.
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It has recently been announced that motorists buying a new car will receive a £2,000 incentive if they trade their old car, if more than 10 years old, to be scrapped. This was part of the UK Budget 2009-2010. The scheme will only run until March 2010, but it has been introduced in an effort to boost the failing UK car industry.
The Chancellor has taken this move after seeing the "success" other European countries have had with their incentives. Germany has apparently seen a 40% rise in new car registrations in the last month.
It is planned that the government and manufacturers will share the cost of this funding. The government has put aside £300m for it to benefit 300,000 customers. To be eligible for the incentive, you must have been the registered keeper of the vehicle for at least 12 months.
While the economic good intentions may be there in theory, as is the norm, the scheme has come under scrutiny by critics who claim that it will not safeguard jobs and will also make a large impact upon second-hand car sales. The environmental impact is also currently in question.
Even though the majority of cars are imported into the UK as only a few manufacturers have bases here, the possibility remains that UK jobs will remain unstable. The scrapping incentive will not only affect the car-makers in the UK but also spare parts suppliers and repair garages. These could suffer from a fall in demand resulting from a mass-removal of old cars from the market.
On the plus side, the scheme has been widely praised for a move towards a reduction in the average age of the national car fleet. This in turn being good for road safety as more modern cars have a wider range of safety features. It will also help replace heavily polluting cars with more efficient and less polluting newer ones. However, the scheme is open for buyers of any new car, not just small, efficient ones, so gas-guzzlers are available too. It also brings up the matter of scrapping perfectly good conditioned cars that are older than 10 years. Could this be less effective too for the environment?
Car Leasing and Rental companies
The car rental & leasing company BVRLA, that supply 2.5 million company vehicles each year, has also expressed its concern about the impact on the second-hand market. They have witnessed that the German market has be completely wiped of second-hand cars, therefore making companies hold on to their cars longer rather than selling them cheap. This could then result in a fall in demand for new cars from companies that would cancel out the rise in demand from consumers. It could totally stop the recent recovery in used car prices & could wipe 6 billion pounds off the value of business fleets.
The U.K. Society of Motor Manufacturers & Traders (SMMT) also stated that there are currently few new cars available in Britain because of manufacturers ceasing production to clear backlogs. They are also reluctant to export from countries that use the euro or dollar because the weak pound reduces returns. It may be wise apply the program to newer used cars as this will make the payments provoke an increase in purchases. What is also important to remember is that the participation of carmakers is optional and they may find be reluctant to take part because of the requirement to contribute fifty percent of the subsidy.
With the intention to get consumers into the showrooms and spending again, the end result may not be one that the government intended with this short term offer. Perhaps looking at the long term effects of this should be detailed further.
Whether your car is five, ten or even twelve years old, any motorist concerned about his or her pocket in these troubling times would be wise to think about purchasing an insurance policy that will extend a car warranty
. This will protect against the failure of a number of mechanical components of the car, covering the repair costs incurred as a result.