Today sees the launch of the government’s “cash-for-bangers” car scrappage scheme, which allows owners of a car or van over 10 years old to receive £2,000 off the price of a brand new vehicle when they trade in their old one. It is hoped that the scheme will breathe new life into Britain’s ailing motor industry.

So far 38 manufacturers have signed up to the voluntary scheme, which is being jointly funded by the government and manufacturers. The scheme will last until the end of February 2010, or until the government’s £300 million in funding runs out.

Under the scheme, those who scrap their old car will receive £1000 from the government to put towards the cost of a new vehicle, as well as a similar discount from the manufacturer. Similar tactics have been tried in other European countries, including Germany, where sales of new cars have increased by 40% since the scrappage scheme was introduced.

Business Secretary Lord Mandelson said that the scheme’s announcement in last month’s annual budget had prompted a “flood of enquiries from customers”.

However, research by car price guide Parker’s earlier this month found that of 600 motorists questioned, 81% would not be taking advantage of the scheme.

“There are so many good deals out there on pre-registered nearly-new stock that actually it’s easier to find a car with a bigger discount under these pre-registered deals than it is under the scrappage scheme,” said Kieran Puffett, editor of Parker’s.

“An awful lot of people were putting off their car-buying decision until they heard about the scheme and having heard it it’s not actually enough for them to really think about buying a brand new car.

“They will be looking at other alternatives. So in terms of shifting new cars it’s not going to do as much as hoped.”

Edmund King, president of the AA, has praised the scheme, saying that the £2,000 discount could act as deposit against loans for less well off drivers. The incentive would also “transform the chances of survival in a crash for thousands of car owners,” he added, since new cars offer a greater level of protection than older ones.

However, environmental groups say that the scheme does not do enough to ensure that consumers do not swap smaller, economical cars for large gas guzzlers.

This entry was posted on Monday, May 18th, 2009 at 9:00 am and is filed under Budgeting, Car Insurance, Loans, Vehicle Breakdown Cover. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.