Confusion reigns as scrappage scheme draws near


Many main dealers we spoke to this week have told of plenty of interested people wishing to find out more about the scrappage incentive. But with the scheme not due to kick in until 18th may, dealers are starting separate enquiry systems purely to record all the details of eager drivers keen to trade in their old nails and get £2,000 for the privilege. Some dealers, however are concerned that the £1,000 to be added by the car makers will in actual fact need to be found from their own profit margins as manufacturers withdraw any tactical offers that may already be in place and worse still increase registered retail prices to try and combat the fact that they have to put in 50% of the cost for funding the scheme. It may be too early to say whether potential buyers take their interest beyond the enquiry stage and also whether attracting prospects interested in the scheme will mean there is the opportunity to sell extra products such as finance payments and other insurance backed products.

The business for many dealers has been changing for some time, and it has not been difficult for even the gentlest of hints about discounts to be positively responded to. These dealers may have to give up the chassis profit margin to obtain a potential profit elsewhere in the transaction. So with the sort of cars many people in the car business are predicting will be the obvious choices (small, economic, low maintenance, cheap tax/insurance but conversely low profit) the dealers we spoke to would like to know what their manufacturer was prepared to do before getting excited themselves.

There are, as we all know, deals already on the table pre-scrappage which offer £,2000 minimum part-exchange so will that now mean £2,000 min plus another £2,000 or just the extra £1,000 from the government and the £2,000 they are already offering? Confused? One thing’s for certain when this scheme wings into action as always there will be good deals and bad, and whilst we will attempt to compare the good and the not so good to the actually ”that’s no different to what you are already offering but just packaged in a different way” kind of deal (or worse), we suggest keep trawling the net and looking to compare, because let’s face it anyone who has a 10 year old car and therefore hasn’t presumably bought a new one for some time, may be out of practice and may not know a good deal from a bad one. They could easily be seduced by the bright lights, the glossy showroom, the gleaming cars and teeth of the salesperson. They may enjoy the guilty pleasure of belonging to the exclusive scrappage club where, for once, having an old worthless car gets you a ticket for the bigger prize!

Many industry heavyweights have come out and said they can’t see the scrappage scheme working at all while others are predicting it won’t achieve anywhere near the results hoped for. We believe that it will end up little more than another marketing gimmick which, if nothing else will certainly generate interest and genuine prospects for the new car market. Some are already seeing the benefits with manufacturers such as Hyundai (this months Car Makers Premier League leaders) seeing a massive increase in enquiries ahead of the scheme. The key point is the “instead of” or “on top of” argument in that will dealers offer the scrappage allowance over and above existing offers or instead of? We fear the latter.

We’ll leave you with a real world example of the confusion that is already reigning supreme before this watered down scrappage incentive gets started. A customer in the market for a new car visits his local dealer and negotiates an excellent discount on a family saloon from a high volume manufacturer, £3,000 off the £17,000 list price. On hearing about the scrappage incentive announced in the budget he decides to wait and trade-in his worthless old banger against the same car hoping to secure a further £2,000 discount, making a whopping £5,000 total reduction. I think you can probably guess the rest but he has subsequently been told that the scrappage discount can only be taken against the full list price which means the same car purchased under the scrappage scheme is, um…£1,000 more.

I think we can expect plenty more stories like this one over the coming weeks and months and we hope we’re wrong but it may just end up proving how the UK government has lost the plot, lost its bottle and has managed to create a half-baked scrappage incentive which will end up not helping customers, not helping the industry and certainly not helping the environment.


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One Response to Confusion reigns as scrappage scheme draws near

  1. Cameron May 10, 2009 at 10:13 am #

    Its the government getting involved with something that the ministers responsible have not taken the time to think through. MTI’s examples above are exactly what is going to happen. This ridiculous scheme is just going to lead to further confusion and will probably further widen the gap between the dealer and the customer.
    Its all so easy in the world of the MP, they get paid silly money for coming up with harebrained schemes that would’t even work in an ideal world let alone a real one. And to think I’m paying for two homes for them to reside in for the pleasure. There is a chasm between the life of an MP and the life of the man on the street they are supposed to be representing and this scrappage scheme is a perfect example of that fact.

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