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UK Scrappage Scheme Now Official

UK Scrappage Scheme Now OfficialIn today’s budget announcement, the proposed car scrappage scheme that will see £2,000 being paid to the buyers of new cars for scrapping their old vehicles, if over 10 years old.  Half of the payment will be provided by the government and the other will be funded by the car manufacturing industry.  The scheme is set to run until March 2010 in order to assist with the car industry that has suffered a severe decline in sales over the last year.

Proponents of the scheme say that it will revive the UK car industry in the same way that it has benefit sales in Germany, which has seen a 40% increase in the sales of new cars since its introduction.  The scheme has been so successful that the German government has extended it in order to continue benefiting car makers.

Opposition cites a number of reasons as to why it won’t provide the long term solution to car sales that the current economic climate has caused.  Much of the money from the £2,000 incentive will be paid to manufacturers that import their vehicles into the UK, effective removing that money from the local economy.  The scrapping of large volumes of vehicles over 10 years old will also decimate the second hand car industry that relies on vehicles of all ages, as over 50% of cars currently on the road are over 14 years old.

The car industry has offered a mixed response to scrappage, as the margins on the small and economical vehicles that the scheme encourages customers to buy are also those that provide car makes with the least profit.  This may lead to scrappage not being available, or profitable for the car maker to apply to certain vehicles as they’ll end up making a loss on the sale.  The most profitable vehicles for manufacturers are the premium models with high specifications and similarly high price tags, and therefore mark-up.

Some manufacturers selling their vehicles in the UK have already announced their own incentive or discount related car scrapping schemes to increase sales, including Citroen and Vauxhall.  Other manufacturers have announced their own plans to engage with the scheme but formal announcements about Renault and Kia’s scrappage schemes final trade-in schemes are yet to be made public.

The long term effects of the £2,000 may well appear years after the March 2011, when older, cheaper vehicles are no longer available at the bottom end of the market.  Environmentalists also state that the effects of scrapping vehicles and disposing of the toxic chemicals, and the impact of producing new vehicles far outweights any minor benefits of marginally less polluting, new model cars.  The immediate effects on new car sales are likely to be dramatic, but is unlikely to solve the deeper issue that too many new cars are being made and that the marketplace is over supplied.

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2 Responses to “UK Scrappage Scheme Now Official”

  1. Nice ! :) .. Thanks buddy..

  2. I love it! That is really going to kickstart the car market, which is great.


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