Car Guide

What’s the true value of the government’s car scrappage scheme?

Updated: Wednesday, 18 March 2009 by Writes Hazel Cottrell
hazel.cottrell@consumerchoices.co.uk

The government is offering drivers £2,000 to scrap their old banger and buy a brand new car, but who can really benefit from the scheme?

The promise of a £2,000 discount off a new car when you scrap your old one certainly sounds good, and it appears that many people have been making the most of this new incentive.

Last week the government said that Britain’s car scrappage scheme had boosted orders of new cars by 35,000, and that it had accounted for one in five new orders in the first month since being launched in the April Budget.

But is this scheme all it’s cracked up to be? How do you know if it’s the right option for you? And are there better deals available?

In this guide we answer all these questions, as well as offering top tips on making the most of the scrappage scheme.

• What is the car scrappage scheme?
• Am I eligible for the car scrappage scheme?
• What to consider before scrapping your car
• How long have I got?
• Our recommendation

What is the car scrappage scheme?

The car scrappage scheme, also known as the “vehicle discount scheme” is a government scheme that lets motorists trade in their old car for a £2,000 discount on a new car.

The £2,000 discount is made up from a £1,000 grant from the government and £1,000 directly from the car manufacturer. The scheme is voluntary, so buyers need to check that the manufacturer of the car they want is participating in the scheme.

The scheme is designed to create an increased demand for new cars and thus support the ailing motor industry and those who work within it. It also aims to rid the roads of the most polluting cars and get people driving newer, more reliable vehicles.

However, this doesn’t necessarily mean the scheme will result in lower CO2 emissions. Environmental groups had hoped the scheme would require people to buy green cars, but the government is providing scrappage grants for all cars, regardless of their efficiency.

Even if you were to buy a new, more efficient vehicle, in most cases the environmental cost of manufacturing the new car would outweigh any benefit of taking your old car off the road.

While the scheme isn’t green, it could save you money. Only a limited number of people will really benefit from using the scheme and to work out whether you could be one of these, see the sections below.

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Am I eligible for the car scrappage scheme?

To be eligible for the scheme your current vehicle must be:

• A car or small van weighing up to 3.5 tonnes
• Owned by you for at least a year (you must have a UK address)
• Registered in the UK on or before 31 August 1999
• Road legal with an MOT certificate
• Registered to you with the DVLA (or currently on Statutory Off Road Notification (SORN)).

The new vehicle you purchase must be:

• A car or small van weighing up to 3.5 tonnes
• Brand new with no previous owners
• A UK specification model
• Registered in the UK to you when you buy it.

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What to consider before scrapping your car for a new one

Crucially, the scrappage scheme is targeted at those who already have a car over 10 years old, and are looking to buy a brand new car.

If this sounds like your situation and you fit the criteria above, there are still several things you need to consider before opting for the scrappage scheme, including the following:

• Do you really need a brand new car? - Nearly new cars or pre-registered cars with a few hundred miles on the clock are often much better value than brand new cars. According to Which? (www.which.co.uk) most mainstream cars depreciate by an average of 35-45% in the first year alone, which even for a small car would outweigh any scrappage discount. For this reason most savvy buyers choose to buy a nearly new car instead to avoid this initial depreciation. There are advantages to brand new cars – most come with three year’s warranty and you can choose the colour and specifications – but you need to weigh these up carefully with the savings you could make by buying a nearly new car.
• Is your old car ready for the scrap heap? – If you are thinking of using the scrappage scheme, you need to make sure your car is worth less than £2,000. Most cars over 10 years old are likely to be worth less but if you have a luxury or sports car or a classic car that might appeal to collectors, then it may be worth more. If this is the case then you’ll want to get it valued. Significantly, if your car is worth anything over £1,000 you may be better selling it privately instead of using the scrappage scheme, as you can often negotiate £1,000 off the asking price of a new car without the scheme.
• Could you get the same discount without the scheme? - If you do your research and are prepared to haggle, you should be able to get a substantial discount off the list price of a new car without the scrappage scheme. According to a recent survey*, 13% of drivers felt they would get a better deal selling their car privately and negotiating on their next model. Indeed, Which? has found that buyers can often save £2,000 or more on mainstream cars bigger than a Ford Focus. However, it says that at the cheaper end of the market discounts tend to be smaller as profit margins are tighter. So, those most likely to benefit from the scrappage scheme are those buying a small car – such as a city car or supermini.
• Don’t forget insurance – If you do fancy trading in your old banger for a shiny new one, you could find that the cost of your car insurance will increase dramatically. Investigate this before making any decisions.

It would be wise to research both new and older models of the car you want and explore all the other discount options before deciding whether the scrappage scheme is for you.

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How long have I got?

The scheme will run until 31 March 2010 or until 300,000 new vehicles have been bought using the scheme – whichever comes first.

So, if you do think that the scrappage scheme is your best option then it would be wise to act soon to avoid missing out.

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Our recommendation

If you think that the scrappage scheme would benefit you, follow our top tips to ensure you get the best deal:

• Shop around – Make sure you compare offers from different manufacturers before you buy. Some manufacturers are offering additional scrappage discounts - for example Ford’s current scrappage promotions allow you to up to £5,000 in total on selected models. The more flexible you can be in the type of car you want, the more chance you have of getting a good deal.
• Never accept the first offer – Even if you do go for the scrappage scheme, you should push for an added extra. The £2,000 discount is provided by the government and manufacturer, not the dealership – so you should always check whether they can offer an additional discount or an extra such as a free CD player.
• Watch out for car finance – If you plan to buy your car on credit, make sure you know exactly how much the purchase will cost you overall – including interest. See our guide to car loans for more guidance.

Compare car loans >>>

More information on the scrappage scheme on the government website >>>

*Survey by moneysupermarket.com