The overwhelming popularity of the scrappage scheme may see the incentive finish sooner rather than later (February 28th 2010 is the official finish date) as the £300 million government funded pot starts to dry up (rapid uptake will fuel fears that the £300 million committed to the project by the government will soon be exhausted – Times Online). Many dealers and manufacturers are hailing the much debated policy as an outstanding success. Although it was only ever likely to be a boost for the budget end of the market, it is surprising the amount of larger more expensive cars from across the board which have been ordered under the scheme. It will be interesting to collate the final figures from manufacturer to manufacturer, but most dealers say that at the very least the scheme and surrounding press has generated increased footfall, which has given salespeople an opportunity to talk to prospective customers about other cars should the scrappage scheme not be suitable for them.
The other interesting aspect which some franchised dealers have experienced is that, with used cars becoming harder to acquire on the wholesale market and with prices rising rapidly month on month, the scrappage deal has in effect filled the void and come to the rescue. So whereas a few months ago the profitability came from selling used cars, now it is very much new cars that have come to the fore. The fact that many buyers who have owned 10 year old cars have not been to the market for a long time and think £2,000 is a great deal means many have just signed up on that basis alone leaving dealers in the unprecedented position of making virtually full profit from their new car stock without really having to try.
Clearly some salespeople are in for a rude awakening when they have to start the negotiation process by giving away their own margins in future. One sales manager told us recently that selling cars on scrappage was like shelling peas, it was that easy and buyers had been queuing up to deal on a new car.
The party could well be nearly over, but let’s take the positives; the government is happy because thousands of old ‘dirty’ cars have been taken off the streets aiding the environment, in addition they have helped stimulate a vitally important part of UK industry. The car makers are happy because production lines are again working at full capacity and cars are again being built in large volumes. Dealers are happy because for very little investment and lots of free advertising they have sold many cars very profitably which should hopefully see them sustain the momentum and lastly, and perhaps most importantly, customers have seen the value of the scheme and supported it in their droves.
Many drivers who hitherto could only dream about new car ownership are driving around in shiny new cars bringing the feel good factor well and truly back to the car business in the UK.