Roddy Graham's Blog: 16 April 2009 - Scrappage thinking
16 April 2009
Next week we'll find out whether the Government has done its homework over scrappage.
Word on the street is that it will finally introduce a scheme, which will kick-start new car sales. As we all know, such schemes have worked wonders on the Continent, especially Germany.
However, the devil is in the detail. Leaks suggest that buyers of new cars and those up to one-year-old will receive a £2000 cash hand-out when trading in a car nine years or older.
All great news for dealers and short-term rental car companies, not so good for leasing companies, as residuals on three- and four-year-old cars may be impacted if buyers who normally buy these cars are tempted by the cash incentive to trade up to an even younger model.
Many of the initial calls for the introduction of a scrappage scheme were prompted by a desire to assist the domestic vehicle manufacturing industry and the wider automotive supplier base. But with British-made cars accounting for only around 15% of new car sales, that argument falls flat on its face. Such a scheme would assist foreign car manufacturers and worsen our balance of payments as a result.
Then there was the green argument. Taking nine-year-old cars and older off the street would benefit the environment. Realistically, the percentage gain on CO2 emissions may not outweigh the damage to the environment of producing the replacement vehicle. OK, in all likelihood, it's already been produced, but you get my drift.
The detail will be vitally important if a scrappage scheme is to make a real impact. What should be introduced?
Well I believe it could be tackled in one of two ways. The first, a £2000 ceiling for pre-2000 cars traded in against a new, one-, two- or three-year-old car with £2000 offset against a new one, £1500 against a one-year-old, £1000 against a two-year-old and £500 against a three-year-old.
The second, £2000 offset against a 200+ g/km vehicle traded in for a 160g/km or lower vehicle aged three years or less, £1500 offset against a 180 - 199g/km for a 150g/km or lower vehicle aged three years or less, £1000 offset against a 160 - 179g/km for a 140g/km or lower vehicle aged three years or less and a £500 bonus for all bought vehicles with a CO2 emission of 120 g/km or less irrespective of age.
My favoured option is the second as it has the greener credentials. Any thoughts?
As you can see, whatever is launched, the devil is indeed in the detail. I just hope the Government will do its homework thoroughly.
Mind you, given its past track record, it'll probably be another hastily cobbled-together package missing a golden opportunity to make a real impact with only car dealers rubbing their hands with glee.