Budget 2009: Will £2,000 to scrap your car work?
The Budget saw Alistair Darling announce a new car scrappage scheme offering drivers £2,000 to buy a new vehicle.
The government claims the measure will help the motor industry and encourage people to drive more cleaner cars.
But will it work? Daniel Barnes drives round to find out if the scheme will have any effect.
In the Budget speech Alistair Darling announced: "I also want to help the UK's automotive industry, which has been one of the British success stories of the last decade.
"But the loss of consumer confidence and credit crunch has led to a sharp fall in vehicle sales around the world.
"In order to help the car industry and retail trade, I can announce that a scrappage scheme will be implemented next month.
"It will provide motorists with a £2,000 discount on new vehicles bought when they trade in cars over ten years old."
£2,000 for a new car
The £2,000 car scrappage scheme was suggested to the government by the Society of Motor Manufacturers and Traders (SMMT), seeing similar schemes in France and Germany increasing new car registrations.
The Treasury has put by £300 million to fund the scheme.
Under the initiative drivers of cars over ten years old - and so more polluting as European emission standards came into force in 2000 - will get £2,000 off the cost of buying a new car, with £1,000 coming from the motor industry itself.
Drivers or commercial vans up to 3.5 tonnes can also take advantage of the scheme.
The cost of the scheme will be spilt between the government and motor industry - with enough funds for 300,000 cars to be scrapped.
The scheme starts in mid-May and will end in March 2010, or when the £300 million funding runs out.
However, there are plenty of small print, which will stop drivers buying any old banger to cash it in for a new car.
Cars must have a current MOT test certificate, registered with the owner for the preceding 12 months.
How many cars?
Analysis by Experian finds of the 34.7 million vehicles on the UK roads, 7.1 million would be eligible to take part.
However, not all these drivers would necessarily be able to take up the scheme.
Vintage car drivers are unlikely to scrap their pride and joy, and for many drivers of cars over ten years old even £2,000 off a new car will not be enough.
It is also estimated over one million cars older than 10 years are worth more than £2,000.
However, some 1.5 million owners of vehicles have the greatest propensity to take advantage of the scrappage incentive, it was gauged.
Kirk Fletcher, managing director of Experian Business Information and Automotive division, explains this figure is just those who have not brought recently, so not likely to
With funding for just 300,000 cars, it seems many drivers not taking up the offer early may lose out.
However, Mr Fletcher explains: "1.5 million car owners have realistic financial means and demand to buy, but this is the absolute maximum," he says, explaining individuals will also face a range of factors influencing if they will buy a car, such as consumer confidence, so this may be lower.
"It is also a big jump to go from driving a car over ten years old to a new car, regardless of incentives."
He adds, though, it is hoped the change will see showroom traffic driven up, as people start to look at buying again, and encourage sales.
Is £2,000 enough?
Criticism has also been those with cars over 10 years old are unlikely to be able to afford a new one - even with £2,000 knocked off.
And the usual new car haggling may be harder with salesman pointing to the £2,000 discount.
However, the Retail Motor Industry Federation (RMIF), which represents 8,000 dealers, is hoping for the scheme to be a success.
A spokesperson explains: "Not all of those buying new cars will be paying in cash.
"There is still finance available and some good deals."
He adds those not eligible for the scheme may also start to show interest and the initiative could bring greater interest in buying a car and get people through the doors of dealerships.
Playing the system
Mr Fletcher reports before the full details of the scheme was announced in the Budget a number of dealers had reported a growing number of people buying cars over ten years old so they could step in straight away into a discount.
However, they will now be left with an old car and a year's wait.
But Mr Fletcher reports dealers expecting some plenty playing the system.
"Families with three or four cars may have the case were the 21-year-old son or daughter will get the older car handed down.
"They are perfectly in their rights to use the old car and the parents to get a new one with a discount."
After the sale has gone through, he added they could contact the DVLA and have the registered keeper changed.
Not all manufacturers
The scheme is also voluntary, so not all manufacturers or dealers may participate, the department for Business, Enterprise and Regulatory Reform (BERR).
A BERR spokesperson revealed the officials are meeting with the industry next week.
"They will have to decide whether they want to do it," she said. "We have to give the chance to discuss it."
"But a number of manufacturers have already come forward saying they want to be involved."
She added by keeping the scheme simple it would be ready to start in mid-May.
Initially SMMT suggested the whole £2,000 subsidy should come from the government, so a number of manufacturers are going through their books to see if the deal still makes sense financially, a spokesperson for the body explains.
"It is good news for consumers and good to see action, even though the funding is 50/50 between the government and industry," he said.
"Companies are holding meetings and will be deciding."
However, initial responses have been positive.
He adds it was "tough to say" what demand from consumers would like, but a similar scheme in Germany had created a 40 per cent rise in new car registrations.
Manufacturers to sign up for the scheme have included Ford, Audi, Kia, Volvo, Renault, Volkswagen and Mercedes-Benz.
Some firms are also running their own versions of the scheme - for new cars or added benefits.
Roland Bouchara, managing director of Renault UK, says: "We fully support the vehicle scrappage scheme and welcome the announcement.
"Already, we have received an unprecedented level of interest from the UK buying public on our website and through our dealer network."
His sentiments were echoed by Mercedes Benz.
Simon Oldfield, sales director of Mercedes-Benz Cars, adds: "We welcome the government's objective of the scrappage scheme to replace older, more polluting vehicles with clean new cars.
"We will publish full details of our scheme and offers once we have received confirmation of the scheme process and eligibility criteria. In the meantime, interested customers can register their interest at their local retailer, or online."
Helping the environment?
In the build-up to the Budget, much was played on the environmental aspects to the initiatives - taking older more polluting cars off the roads.
However, building new cars and disposing of old cars also has an environmental cost.
In the small print of the Red Book, the Treasury admits the effects for the environment will be limited.
"[The car scrappage scheme's] primary purpose is to provide a boost to new car sales to help the industry in the current downturn," the Budget report states.
"The scheme will encourage replacement of ageing vehicles by newer models with generally lower emissions, and is expected to have a neutral or modestly positive environmental impact."
Opposition
The Association of British Drivers (ABD) is less optimistic about the prospects for the scheme.
"I hope it works, but I don't think it will," says Hugh Blandon of the ABD.
"The funding is for 300,000 vehicles, but I'll be surprised if they sell a tenth of that."
"We are not impressed. First off the government had a misleading statement. It is not a £2,000 discount, as £1,000 is coming from manufacturers. Typical spin.
"If you walk into a dealers today, you can probably get £2,000 knocked of the price. With the scrappage scheme you will not get that on top of the discount."
Furthermore, he explains many of those driving cars over ten years old won't be able to afford a new car, even with a discount.
Mr Blandon adds while the schemes in Germany have been a success, German drivers have been buying German cars and so aiding the nation's economy.
The ABD instead claims it would be better for the economy to keep older cars on the road so people could have their cars repaired at local garages - where some 600,000 people are employed.
BERR guide the UK scrappage scheme
In a nutshell:
Motorists will be offered £2,000 towards a new car or van if they trade in a vehicle which is 10-years-old or older.
The details:
1. Its simple to take part - you just need to talk to a participating dealer* who will check the exchange qualifies, complete the necessary paperwork and arrange for the old vehicle to be towed away.
2. The scheme runs from mid-May until March 2010, or until the Government's funding allocation of £300 million has been used.
3. It applies to commercial vans (up to 3.5 tonnes) as well as cars that are 10 years old, or older.
4. The £2000 incentive is made up of £1,000 from the government matched with a further £1,000 from the motor industry.
*NB: The scheme is voluntary, so not all manufacturers or dealers will necessarily participate.
The old vehicle must.
. be a passenger car or small van up to 3.5 tonnes
. be first registered in United Kingdom on or before 31 July 1999
. be currently registered with DVLA to the registered keeper making the application, or currently on Statutory Off Road Notification (SORN)
. have a current MoT test certificate
. have a registered owner with a UK address and the owner must have been the registered keeper of the vehicle continuously for the preceding 12 calendar months before the order date of the new vehicle
The new vehicle must be.
. a passenger car or small van up to 3.5 tonnes
. first registered in the UK after the date the scrappage scheme is launched and declared new at first registration in the UK with no former keepers
. a UK specification vehicle
. registered to the same registered keeper as the registered keeper of the eligible vehicle to be scrapped
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