Make sure you stay protected if you’re not taking the scrappage incentive

Posted in 'Credit Crunch' by Richard Catlin

11 May 2009

The Government’s proposed Scrappage Incentive Scheme - a centrepiece of its recent budget and an integral part of its plans to revive Britain’s ailing new car industry - has been predicted to fail, virtually before it has even begun.

Run by the DVLA, the scheme offers £2000 towards the cost of a new car when you scrap your existing vehicle – as long as it is over 10 years old and meets certain other requirements. Half of the £2000 incentive comes from the Government, with participating dealers or manufacturers making up the other half. Eight of the ten largest car makers in the UK have signed up.

Levels of new car sales have fallen for 11 consecutive months and April’s figures were down 24% on last year, representing the lowest for 17 years. The scrappage scheme is due to run from mid-May until March 2010, with the Government committing £300 million to their plans to kick-start consumer confidence in car purchasing.

Although a similar programme in Germany has seen their domestic car market grow for three consecutive months, with April sales in the UK down by 19% on 2008’s figure, leading experts have predicted that the UK plans won’t have the desired effect.

Pendragon, the UK’s biggest car dealership has warned that beleaguered manufacturers are already stretched with current offers and their £1000 contribution to the incentive will simply replace offers that they already had in the pipeline. The German Government’s scheme supplies the whole amount, without reliance on manufacturers to contribute.

With the used car market currently offering such good value for money – through channels such as Autotrader - few consumers will be prepared to make the big jump from a ten-year-old car to a brand new one, especially with so much uncertainty over job security and the availability of finance terms.

Alternatives to purchasing a new car – the used car market or car leasing - both require a smaller financial commitment, but at the same time have their own pitfalls that consumers need to be aware of.

Car leasing - where you don’t actually own the car but instead pay a monthly fee over the course of the lease before handing it back, will involve a credit check when you first apply. Any adverse information could see an application rejected, so it pays to check that everything is as it should be on your credit report before applying. Lings Cars is a good place to see the likely monthly cost of leasing a new car.

In the used car market, an estimated 1 in 3 vehicles have some sort of hidden past – having either been stolen, clocked, substantially damaged and repaired, or having HP or finance still outstanding. Unfortunately, when buying a car privately, it’s the buyer’s responsibility to check that everything is ok, at the risk of losing both the car and the cash if the worst happens.

Using a service such as mycarcheck before you buy is the most sure-fire way of ensuring that there are no unwanted surprises once you buy a second hand car. Whether the Government’s plan to get us all buying new cars will work however, is much less clear-cut.