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The government, we learn, is to follow the lead of continental neighbours France, Germany and Italy in attempting to revive flagging sales of new cars by offering buyers £2000 to part exchange their older vehicles. Unsurprisingly, sources within the domestic motor industry welcome the move because sales figures for March 2009 fell 30% and latest monthly car production figures show an alarming fall of 51%.  Whilst car makers and subsidiary component manufacturers lay workers off, there is a less obvious impact on banking and financial services because most new cars are purchased on finance or loans of some sort.

Of course, all drivers are interested in saving money but many are suspicious because our government has a very bad record when it comes to motorists. On going plundering of road tax revenue for usage other than on the roads, endless fuel duty rises and insurance tax combine to make the lot of motorists and transport operators an unhappy one, compounded further still by an announcement last year that future vehicle excise duties on both new and existing cars built since 2001 were going to be governed by carbon emissions. This move depressed the values of cars more or less overnight and sales of new cars fell too when it transpired that initial road tax on some more expensive models would reach almost £1000. Before anyone started mentioning the ‘r’ word last year, the author recalls seeing a television report in which it became apparent that many drivers were being driven off the roads by these high taxes.

A closer look at the scheme: funding, eligibility and the small print

The government has allocated £300m for the scheme, which is due to be rolled out during the course of May 2009.  Most industry sources welcome the move but some are quick to point out that initial indications from Whitehall were that £580m would be assigned to the initiative.  Now, it is clear that instead of wholly funding the scheme, the government seek to half the cost by sharing it 50/50 with manufactures.  Simple mathematics reveals that the scope of the operation is limited to 300,000 vehicle sales.

Is now, then, a good time to trade in that faded looking, monster miler classic SAAB 900? The rules seem to indicate that the £2000 reduction will apply only to brand new unregistered vehicles, which can be anything from the smallest car up to a van weighing 3.5 tons.  That old faithful SAAB 900 with 300,000 miles on the clock with the droopy headlining would be eligible, as would a car or light van registered before 31 July 1999… so long as you have been the registered keeper (at a UK address) for at least 12 months and the vehicle must be taxed (or SORNed) with current VOSA (MOT) test. Motability customers purchasing cars on terms will be eligible to apply, so long as their name appears on the new V5 registration certificate (logbook).

In theory, all well and good but just how many people who are running older cars do so out of choice?  A reduction of £2000 still represents a substantial outlay and those running older cars out of economic necessity will be unable to take up the offer.  At present, it is becoming clear that the £2000 rebate will not be able to be combined with any other offers and will only apply to the maker’s recommended retail price.  In the current economic climate, it is usually possible to negotiate a discount on any new car and on more expensive models; this can amount to four figure sums.

Critics form polarised groups: on one hand those concerned with economics worry that 80% of new vehicle sales will benefit makers of foreign cars and that the scheme isn’t nearly big enough to have a significant impact on the motor industry anyway, while on the other, the environmental lobby is disappointed that the scheme does not limit buyers to low polluting vehicles.  Although the view that the scheme would benefit foreign car makers is sustainable, this overlooks the fact that many British companies manufacture components for these cars.  For the average car buyer, the scheme has to be seen as largely irrelevant because irrespective of whether they own a qualifying vehicle or not, similar savings can be readily secured without any restriction, as a reward for a little shopping around. Citroen, for instance has offered owners of cars made before 2000 a trade in incentive of £2000, while retail giant Carcraft has just announced a guaranteed £2,000 minimum part exchange on their Summer Specials range.  This move brings newer, better cars within reach of some people who cannot participate in the Government’s scheme.

May 1st, 2009

Reader feedback has prompted the author to seek further opinions from the motor trade. One trader
with more than 30 years experience to draw upon angrily dismissed 'Cash for Bangers'
as '...a complete farce. The scheme fails to live up to its initial promise - not only has the government's contribution been half what they promised originally but now we are mired in a row over VAT and piles of paperwork. Nobody seems to know what is going on. I suppose they (the politicians) were too busy filing expenses claims to sort the job out properly!'

The jury may still be out but early indications are that dealerships such as Town Centre Citroen (Sunderland) and Jennings (Ford) -who have branches across the North East- were wise to launch their own initiatives in advance of the much vaunted government scheme. It seems as if companies' own independent incentives will prove more effective at generating sales than the official, government policy which looks increasingly like the proverbial damp squib.

May 26th, 2009

Upadetd comments: late July 2009 In this, the SECOND update, we pass further comment having actually done what our government always says its doing ('monitoring the situation') when public concern mounts. Well, our 'robust' response is that initial misgivings over the scheme seem justified with traders we know being deeply unimpressed and alarmed by the lack of understanding of the rules by the general public. Worse still, it transpires that not only have a number of quite rare classic cars been traded in -and scrapped- but also bringing a lot of older cars up to MOT standard, so they can be traded in for scrap, has meant many brand new parts have been scrapped. NONE of the new tyres or indeed ANY components can be taken off the vehicles being scrapped- surely, this is a wanton waste at a time when we are constantly being urged to recycle?

27 July, 2009

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