Government Car and Van Scrappage Scheme

Opinions differs when it comes to trading in your old banger for a new car just because you can get an extra £2,000 off on a new car we discovered at Money Saving Tips . The governments’ recent incentive was to increase car sales and to boost the economic situation in the UK. The car industry has been crippled badly by the downturn in the economy. Sales have dropped by nearly a third in the past year and manufactures have reduced staff, temporarily closed down factories, placed many of their staff on a three day week and the manufacturers have asked the government for help to save their industry.

Van and Car Scrapage Scheme in Operation!

The Government responded by providing an investment of £300 million in the scrappage trade-in scheme starting today for all cars that are over ten years old. Car owners will receive a £2,000 discount or a on a brand new car bought when they trade in their old car. Any cars traded-in under the scrappage scheme will be officially scrapped. Death by a crusher will follow so that the cars will not be resold on the second-hand market. The governments £300 million ‘Cash for Bangers’ scrappage scheme initiative had been due to end in February2010, or when the limit of 300,000 vehicles being scrapped was reached.

There are around 30 million car owners in the UK and it and it is estimated that less than 1% of us will actually qualify for the £2,000 discount from the Treasury before the funds dry up. This government incentive is good news for the car industry and for the thousands of people who work in or are dependent on the car manufacturing sector in the UK today.

In order to qualify for the governments’ £2,000 car scrappage saving discount you and the car dealership need to meet the following requirements:

1. The owner of the new car or van must be the same person who owned the scrapped car.
2. Your car must be over ten years old. Any vehicle offered must have been registered before 31st August 1999.
3. First registration date of new car must be Britain 18th May 2009 and there must be no previous owners of any description and should meet British specification only.  This excludes bargain priced cars unused and already pre-registered and unused foreign specification vehicles.
4. Trade-in a ten year old vehicle for a brand new car or van under 3,500 kg.
5. You will need a current MOT certificate.
6. Any car offered must have a valid DVLA registration documents in the name of the owner.
7. The owner must have owned the car for at least 12 months prior to trading-in the vehicle.
8. Car dealerships are required to contribute £1,000 towards the £2,000 discount being offered by the Treasury Department.
9. Participating car dealerships need to sign up to the Government incentive to be able to operate the scheme.
10. Initially it was thought that the vehicle should also be legally taxed and insured. After further clarification by the Telegraph Motoring, the SMMT have decided that neither a tax disc nor car insurance will be required.
11. All cars offered for scrap must be a car or van weighing up to 3,500 kgs.
12. The new car or van can originate from any motor manufacturer anywhere in the world.
13. The brand new vehicle should be fuel efficient and low-polluting.

Last week the price comparison company uSwitch.com said the £2,000 incentive would effectively be “lost” in depreciation within 88 days of consumers buying a new vehicle within the scheme. The AA responded by backing the scrappage initiative and saying that the depreciation analysis was irrelevant and misleading and that the scrappage scheme would benefit “hundreds and thousands of consumers”.

Whilst we understand the reasons for the incentive of £2,000 discount on a new car when you trade-in your old banger. It is important that you have a look at the price of a nearly new vehicle as well. Let me explain. If a new car is £13,000 after the £2,000 discount has be applied and you have the choice of a second-hand car that is six-months old with 5,000 miles, in first-class condition for £10,750. Then you have to ask yourself whether it is worth paying the difference £2,250 for a brand new car that will depreciate within the next 88 days as previously suggested.

Another point of concern is financing a new car purchases and at what cost. Remember that interest rates have fallen and lenders are charging upwards of 7%. Finance lenders still do not have a great appetite for lending. However, arranging finance on a vehicle might be easier as long as you have no adverse credit on your Experian credit report and are squeaky clean financially. The reason for this is that the finance is secured against the car or van and can be repossessed if you stop paying the agreement. Just watch-out for the cost of borrowing – a deal is only a great deal when it does not cost you a fortune.

Your thoughts, experiences and comments are always welcome. You can join the discussion below by leaving your comments.