More calls for UK scrappage scheme but can it really help?

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The Road Haulage Association and BVRLA (British Vehicle Rental and Leasing Association) are the latest bodies to come out in favour of a scrappage scheme and join the growing lobby. So why is the prospect of a scrappage scheme so popular and will it really bring the benefits hoped for by so many? It appears from reports that similar policies are proving very successful around Europe especially in Germany. But can we really take the German example and graft it onto the UK car market? The scrappage scheme in Germany did well mainly because most people in Germany actually drive German cars and a major proportion of the workforce work in the motor industry in some capacity. It is therefore much more important to the German economy to continue making cars for the local market and increasing exports and therefore a much easier scheme to sell to the government. German cars are arguably the best made, best looking and best value, BMW, Mercedes, VW, Audi, Porsche are all world renowned brands producing huge numbers worldwide and almost any idea aimed at keeping these giants fully operational would be fully embraced over there. That said, there has also been criticism of the German scheme in that it has actually skewed the new car market in favour of smaller, cheaper cars and as a result German premium car makers have suffered.

So why the reluctance over here? Well at MTI we have attempted to give a balanced view, and indeed on the face of it apart from freeing up credit lines to car dealers and their customers, nobody has yet come up with a better idea to stimulate the motor industry in this country. Giving owners of older more ”dirtier” cars a reported £2,000 towards the purchase of a new car, on the face of it seems an easy way of jump starting the production of new cars, getting workers back on the production lines and customers in the showrooms. The problem is that generally drivers who own this type of car would not normally be the kind who trade up to brand new be it from a financial point of view or lifestyle choice. The truth is large numbers of people only think of cars as a way of getting from a to b and would be horrified at the thought of spending more than £10,000 on a new car. Secondly if the ”allowance” were to be used to form the basis of a deposit for a finance package and lending conditions remain as restrictive as they are currently then surely many of these customers will find it difficult to obtain credit anyway. On the other hand, according to some dealers, a large deposit is certainly less risk for a lender than someone putting down a few hundred pounds and leaving the lender far more financially exposed if they have to re-possess.

From a manufacturer and dealer point of view the opportunity to sell more cars and, better still, sell more finance to this type of customer will surely outweigh any negatives especially in the short term. As we are constantly informed the Earth is getting warmer (sorry, the climate is changing) so at the very least a scrappage scheme may lead to more ‘cleaner’ cars on our streets, and until someone can present a better solution why not give it a go?

There is, however, with this present governments track record, a very real danger that were a scrappage scheme to be introduced we would end up with a watered down, cumbersome, bureaucratic waste of time that ends up not helping the environment or the motor industry in equal measure.