REPORT: U.K. officially launches £2K scrappage scheme
As expected, U.K. Finance Minister Alistair Darling has officially announced a new vehicle scrappage program that will pay motorists £2,000 ($2,900 USD) for trading in a vehicle that's at least 10 years old for a new car. Half of the funds will be provided by the government, and the other half will be paid out by automakers.
There will be no regulations governing the required fuel efficiency or type of vehicle that will qualify for the subsidy, leading some to question the environmental benefits of the scheme. There are also questions as to where the £300 million ($435M USD) required to fund the program through March of 2010 will come from, as Darling has also announced that the U.K. budget will hit its largest deficit ever.
In addition to approving the car scrappage scheme, the government also officially approved an increase in the national fuel duty by 2p per liter.
[Source: Reuters | Image: Matt Cardy/Getty]
Reader Comments (Page 1 of 2)
Bloke 3:40PM (4/22/2009)
Lots of nice Ford Escort head and taillamps there, with a some Ka headlamps and Sierra estate taillamp thrown in for good measure. The £2K is a good deal for cars worth only a few hundred quid.
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Rich 3:41PM (4/22/2009)
Y'know, the £/$ exchange rate is so variable right now, it's hardly worth giving today's equivalent. Last week, £2k was $2995. This week it's around $100 less. Last year it was near enough $4k. Who knows what it'll be next week?
The other thing is that you're not allowing for market value variations. In the US, $3k will buy you a decent, loaded 10 year old car. In the UK? £2k will probably get you moving, but you'll wish you hadn't. There's a good reason the manufacturers call it "Treasure Island".
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LoneWolf 4:10PM (4/22/2009)
Well, even a £100 car with gas is cheaper than british Railways..as we learned from Top Gear ;)
Bloke 4:29PM (4/22/2009)
Actually, the UK market is so saturated that you can pick up a great car for next to nothing - I recently saw an immaculate 2007 Vectra 1.8 with 35K miles on it at a typical car supermarket for just £4,500 - a saving of £12,000 from new. A loaded four-five year old Vauxhall Signum with less than 50K miles on the clock can be had for £4K or less. Top of the line '06 Mondeo Ghia X with 46K miles - £5,500.
£1,000- £1,500 will easily buy the likes of an early 90's 3-series or a ten year old Saab 9-5 or Alfa GTV, and a grand will easily get you a decade old Mondeo or Vectra is super condition. A couple of years ago I sold my cherished old '95 Ford Probe 16v in immaculate condition and full MoT with just 56K miles for £400 - and that was a private sale. Car dealers were offering me just £150 to trade it in.
Rich 4:41PM (4/22/2009)
Okay, so Bloke has some anecdotes that appear to contradict me. In the same terms though, the US market is far more saturated than the UK market. Prices *are* far lower here, and there are similar exceptions over here too.
My point is that, in general, you're not going to get a worthwhile car for 2 grand in the UK, but the way it's written in the story is that the UK is giving $3k to take old cars off the road, and $3k is a lot of car over here.
Bloke 9:41AM (4/23/2009)
Rich - what evidence do you have that the US market is more saturated? Your original comments about the UK market were completely incorrect and it's clear you have either little or no experience of that market.
The biggest problem here is that Ford, Vauxhall and Peugeot have each flooded the market with nearly new car schemes via dealers - for example, Ford Direct and Network Q. Such vehicles are often a few months old and come direct from the manufacturer and costs thousands less than brand new cars. Whatsmore, you have a two week grace period whereby you can return the car even if you dislike the colour, and you still get the full manufacturer's warranty.
Second comes down to the company car market here which is the largest in the world. Virtually any job with a managerial position and above has a company car included, and there are many leasing companies catering to the company car market. Once those cars enter the private market, they're sold for thousands below book value which depresses prices further. Given the price of fuel and annual registration based on CO2 emissions, cars with larger engines depreciate far quicker than smaller, fuel-efficient models. As a result, a common-or-garden Ford Fiesta will lose half of its value over three years, however large saloons such as a Peugeot 607 or Fiat Croma retain less than a quarter of their original value in the same time period. A five year old 4-cyl BMW 3-series will fetch similar money, of not more, than an 8-cyl 7-series of similar age simply because of the cost to run.
In short, £2K in the UK will buy you a raft of good cars. For example, one a lot around the corner from me has a fully loaded, immaculate '02 Pug 407 with 70K miles with leather, air, alloys and all the trimmings for £1,500. Another has a loaded immaculate '01 Mondeo with the same mileage for £2K and a pristine '98 Ford Puma 1.7 with just 50K miles for the same money. Another has a gorgeous '02 Renault Megane coupe with 60K miles for £2,100.
It's important to know what you're talking about.
Stephan Wilkinson 4:21PM (4/22/2009)
I simply don't understand these scrappage schemes that are supposed to kickstart new-car sales. Somebody who gets paid to junk a clapped out Corolla or Focus is _not_ going straight to the new-car dealer. They're going to get a good used car. They were smart enough to get 200,000 miles out of the car they're junking, so they're certainly smart enough to not buy a flavor-of-the-month new car and eat a used Corolla's worth of depreciation the first time they start the engine.
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lUp 8:09AM (4/23/2009)
you are right, you don't understand it :)
you are only entitled to receive the money, if your scrap your old car and buy a new one. you can scrap your old one and don't buy a new one, but won't receive any money. it's like a "mail-in rebate" that you hand over to the car dealer when you buy a new car.
In Germany it's working like a blast, with all the possible economical and ecological problems.
akboss302 8:33AM (4/23/2009)
I have been considering this a lot lately - the reliability and longevity value of cars, used versus new. I've always bought used, but as new as I could afford. 3 years off the lot with 25K miles for my most recent car. But after experiencing non-stop reliability issues with almost all of them, I begin to question the value in buying used. You really don't know who owned the car first, which is the big question mark. Many people lease now, and treat their cars like crap and toss them back to the dealership to trade in for another. I think for my next car I'll be looking for a low finance rate on a new car, and this program would be perfect to encourage buyers like me to do the same.
Stephan Wilkinson 9:49AM (4/23/2009)
Good point, IUp--I forgot that...
bondo 4:08PM (4/22/2009)
It has been an interesting day. In honor of Earth Day I decided to take the Earth to lunch.
The Earth didn't have much to say about the environment, but it did express interest in how quickly the Nissan GT-R was able to lap the "green Hell". The Earth did pose an interesting question when it asked if the overall weight of the planet goes up or down when a new car is created.
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Aki 4:37PM (4/22/2009)
Does that mean you can buy a clunker for $500 and then have it scrapped for a $1500 profit?
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Aki 4:38PM (4/22/2009)
Well $2400 profit, wasn't bothering to convert the pounds.
Gav 5:09AM (4/23/2009)
Nope, as to qualify for the discount/subsidy you need to have owned the car for 12 months. So even if you buy the car now the scheme will probably have run out of money (just like out great and glorious government) before you come to trade it in.
LoneWolf 5:02PM (4/22/2009)
I think the car you scrap needs to be at least a certain time in your hands.
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LoneWolf 5:02PM (4/22/2009)
Oh well, we need an edit button...that doesn't make sense..
BlackEmblem 6:26PM (4/22/2009)
I wish our country offered this kind of incentive ._.
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Nightcrawler 9:46PM (4/22/2009)
There are two similar U.S. proposals in Congress, and President Obama expressed support for such a plan at the end of March. But at the moment both of those bills are "in committee" in Congress right now. What that means, I don't know for sure, but my understanding is most bills die "in committee". Maybe Obama's stated support makes that less likely to happen, I don't know.
From the Federal government's perspective, when would be the optimal time for such a program, before or after a GM bankruptcy? I'm wondering if it something they might trot out right after a GM packaged bankruptcy to give a boost to "New GM".
Joonsik Yoon 7:21PM (4/22/2009)
I know I'm being pedantic, but the UK doesn't have a federal tax on anything. It's just a fuel duty. No "federal".
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Baskingshark 8:01PM (4/22/2009)
The banging sound you hear is another nail being pounded into this government's coffin. To put it in Yoda - a disaster this will be.
The reason that this works in Germany is because Germans have savings! So they can take advantage by buying cars with cash. Brits are already up to their eyes in debt. The LAST thing that most people in the owner-of-a-car-over-ten-years-old demographic need to be taking on is car payments, not that any of the finance companies will lend them money any more.
Also, you can get a perfectly good used car in the UK for well under £1K that'll last for ages and do fine, but anything but the smallest of new cars are so pricy that £2K off of them is going to make no difference. Of course Kia, Citroen and the rest all rushed to point out how cheap their smallest models are, and how little they'll cost after you knock £2K off, but if you're a family who NEED an estate/station wagon or family car, a C2 isn't going to work for you, and a new car in the same class as your ten-year-old one is going to be far out of your reach.
Given how inept this government is, setting up the infrastructure for this scheme will probably be bungled several times over, require many more people to be hired in to mess things up and wind up costing a fortune, and all this is before you even BEGIN to look at whether scrapping one old car and building a new one to take its place pollutes more than keeping the old one going in the first place.
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