Morts Musings

One of this year’s Budget measures, which may have been largely over-shadowed by just how much debt our Govt has got the country into, was the car “Scrappage Scheme”.
Basically the scheme allows consumers to trade in vehicles over 10 years old for a subsidy on the purchase of their new car, it’s idea that’s been used by the Germans, quite successfully, and on that basis has been adopted by the UK Govt, although quite what their aims for it are are unclear to me, if I’m honest.
My first thought was that it would be good for the UK car manufacturing industry, and although I think it’s a very dangerous precedent for a Govt to be bailing out businesses which don’t have the gumption to make it on their own, it has to be acknowledged that 800,000 UK jobs are dependent on the sector, and the last thing we need, while striving for economic recovery, is more unemployed people!
However, it turns out, on digging a little deeper, that ~86% of vehicles brought in the UK are manufactured abroad, while ~75% of British made cars are exported, which makes me wonder just how effective a stimulus this will make for the UK economy. I guess time will tell.

My next thought was that it might at least have benefits with regard to pollution, and green issues, and on this score the scheme probably has more merit, although again, only time will tell. Still, given that, on average, 85% of a cars CO2 emissions are generated during it’s lifetime (with 10% being due to production & the remaining 5% being down to it’s disposal,) there may be some benefits here.
With petrol prices as high as they are, and higher taxes for cars that emit CO2, people tend to be moving towards less fuel hungry motors anyway, & the Scrappage scheme may be the perfect incentive to get Brits to ditch their old bangers in exchange for cars with a lower carbon footprint.

Of course, with average personal debt being at an all time high, and banks being somewhat coy about lending, it does leave the question of how many people will be in a position to benefit from the Scrappage scheme, but, given that interest rates aren’t exactly attractive for would-be savers at the moment, it might be a good time for those who can afford it, and fancy getting themselves a new car, to make their move.

Most of the major manufacturers are supporting this initiative, and in some cases are offering more than the minimum payment of £2000 guarenteed by the scheme; For example Citroen’s Scrappage scheme offers up to £3,000 Scrappage allowance on some models, and in many cases allows its existing new car deals to be used in conjunction with the Scrappage scheme.

Further reading:
Guardian: Car scrappage scheme attracts elderly owners with their elderly vehicles
Telegraph: Budget 2009: Eight questions for Alistair Darling on the car scrappage plan
Independent: Is scrappage subsidy really such a great idea?