Car scrappage incentive lost to depreciation in 88 days
Drivers taking advantage of the car scrappage scheme will see any gains wiped away in just 88 days.
The scheme will be live from May 18th - giving £2,000 for those buying a new car and scrapping one over ten years old.
However, even with the £2,000 scrappage bonus, motorists buying the UK's top ten best-selling new cars are still set to lose £527 each month due to depreciation in year one.
Data from uSwitch.com shows how much models are the popularity of the car, the number of vehicles manufactured and the perceived value or quality of the brand among consumers.
The UK's top ten best selling new cars on average cost £16,232 - but lose over half their value in the first year alone.
The UK's best-selling car - the Ford Focus Style - loses £8,625 or 51 per cent of its value in the first year, while the Vauxhall Astra loses 67 per cent of its value.
The Ford Fiesta Hatchback depreciates the least, losing 38 per cent of its value in the first year.
Mark Monteiro, insurance expert at uSwitch, said: "Whilst the scrappage scheme is a positive bonus for consumers, it seems even this payout can't hold its weight against the magnitude of vehicle depreciation, which dents the value a car from the moment you drive off the forecourt."
A further issue for those switching to a new car is the insurance cost.
"The insurance cost could be significantly higher than they are currently paying for their old banger," said Mr Monteiro.
"All drivers who are planning to switch their old cars for a newer model need to be prepared for a hike to their premiums of up to 30 per cent."
Looking through the small print for insurance for a new car is also necessary.
Many car insurance policies will only pay out the cost of a car's current state including deprecation.
Out of the insurers surveyed by uSwitch only eight providers replace a brand new vehicle written off in an accident within the first 12 months with an identical 'like for like' vehicle.
Saga is the only insurer to offer this within a 24-month timeframe.
Other providers, such as Admiral, Diamond and Elephant factor in depreciation, so if the car is written off in the first month of ownership the driver could lose several hundred pounds.
Any motorist who is considering participating in the car scrappage scheme should also make sure they get their old car valued before entering upon the initiative scheme - if it is worth in excess of £2,000, it is not beneficial to be involved.
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