The Car Scrappage Scheme – is it for you?

The car scrappage scheme was introduced at the last budget until 31 March 2010 in an effort to provide £300 million support to the car industry. It follows on from schemes that have been operating successfully in some European Countries. Essentially you can get £2,000 for trading in a 10 year old car that you have owned for at least a year for a new vehicle. £1,000 comes from the government and the balance from the vehicle manufacturer. With cars always being a touchy topic we asked Nick and Chris to put forward points in favour or against the scheme.

For: I’m no car enthusiast so for me the vehicle is designed to get one from A to B in the maximum of comfort. I am hopeful that the scheme produces increased orders and allows employment to be maintained within the car industry in the United Kingdom.

Safety is an important point. Whilst I look back warmly to travelling around the country in a Ford Cortina or a Hillman Hunter it does not mean I need to repeat the experience. Whilst classic cars look lovely I have to confess I don’t feel comfortable in them and even with the safest of drivers I am not convinced we will get round the next corner.  A 10 year old car might not necessarily present such a problem but we do forget that a previous car does not have the brakes that our current model has!

Comfort comes a strong second to safety in my book. If we spend time in our car surely we want to be as comfortable as possible. I am sure that the current model for the majority of cars is more comfortable and therefore preferable to the one being scrapped!

The green issue is also an important consideration. In the small car market I am sure that huge strides have been made in the last 10 years to make the engines more efficient and with car taxation being changed over from the old CC method to the new CO2’s continued efforts are being made to reduce the emissions that are harmful to the environment. What gets overlooked is the miles travelled to bring vehicles into the Country but this is a political hot potato, along with food miles, that will be debated more and more as time passes.

The majority of people want to drive the newest vehicle that they can. When I started driving you aspired to a new vehicle but knew it was a distant dream. Long journeys were planned with spare parts in mind or not even contemplated and starting the vehicle on cold winter mornings a lottery to say the least! Youngsters have never experienced these problems and there is no reason to suggest that they would want to start. Affording the vehicle and insuring it are the current problems but that’s another issue altogether!

Against: I look at the car scrappage scheme as a classic car enthusiast, someone who is concerned for our environment and as a Tax Partner of Lambert Chapman LLP. The three don’t mix. I recollect we were told the car scrappage scheme was to boost the UK car industry and take older vehicles off the road in favour of newer, safer and potentially greener cars.

Let me break down this sentence into the following:

“UK Car Industry”

I consider that the UK doesn’t have a car industry anymore, at least, not of the importance it once was. We used to be a world leader in the car industry but by a mixture of complacency, poor management and over enthusiastic union power, it was destroyed. The car scrappage scheme certainly brings newer cars onto the road and a lot of them are the small lower end market vehicles which, by the very nature of their manufacturers, means a lot of our money is leaving these shores. I recently saw a newspaper report that a certain Japanese manufacturer was having to get its work force to work overtime so they could build enough cars to ship to Britain in time for the new batch of UK registrations.

“Newer Cars”

Why do we have to love “newer cars”? Why don’t we look to having well built cars that last? We are preoccupied with fads and fashion.

“Safer Cars”

 I agree that if cars are poorly maintained they become unsafe so why not channel some of the money into resources to make sure the authorities can finance more rigid checking of more vehicles to ensure they are safe? A modern car is easier to drive than an old car but if the driver adapts their style an old car, driven correctly, is safe (maybe a purge on unsafe drivers is needed?)

“Greener Cars”

I am not convinced on this. I said I was a car enthusiast and my classic car is a 1972 Rover V8. People may say that it is a gas guzzler and not very green but I counter that argument by pointing out I am driving 37 year old metal. There hasn’t been the cost of using fossil fuels to destroy the old vehicle and refine metal to make a new vehicle (never mind the transport costs, etc of new vehicles). Our Government introduced, in April 2002, a 100% capital allowance relief on cars with low emissions. The 100% only applies to new cars so a second hand car doesn’t qualify for the enhanced relief. That is not green as it does not encourage recycling!

I don’t see the car scrappage scheme as really being the answer. I feel that the money could have been better spent in supporting industries that generate wealth for our country. There is also the impact on small businesses who rely upon making parts for old cars. Many of those businesses are in Britain and close to the old car manufacturing establishments. As at August 2009 it was reported that there has been over 35,000 new cars ordered because of the Government scrappage scheme. I am surprised at the number which means 35,000 less opportunities. If the green issue is to be addressed then why is there not a heavy charge on new luxury motor cars or why did they not use the car scrappage money as an incentive on new green vehicles that really are green and are being produced in the normal course of replacing cars?

Recently there was a report that some manufacturers have increased their car prices because of the car scrappage scheme so that they end up being in the same position. That is disappointing but from an economic point of view, who can really blame them?

On a final note, I know of a number of good classic cars that have gone into the scrappage scheme. The scheme means they must be destroyed so it is likely there have been some good, running and reliable old cars that provided transport to a family and the vehicle isn’t going to depreciate any more and could possibly be appreciating. Will the replacement cars depreciate? I suppose one way of looking at it is that the owners of similar models of cars that are in turn classics will find the value of their classic has increased. I could be one of them.

So there you have it – but what do you think?  If you wish to add your own comment at the foot of this article.