As Alastair Darling held aloft his battered case last week, the country braced itself for a budget that would, in one swift move, repair the beleaguered economy and bring prosperity once again to the good citizens of the UK. With hope and optimism, we tuned into the news to see what new benefits would await us and which taxes would be abolished so we could all enjoy a little more ‘disposable’ income and communally get the tills ringing again on the high streets of the country.

What we actually got was a bit of a disappointment (from my point of view) and a new ’super tax’ of 50% for earners of £150,000 or more. So, they’ll all be moving abroad now to a country where being rich isn’t so frowned-upon. The rest of us can pay for the loss of their tax revenue by paying a bit more for our road tax, pint of beer, bottle of wine or a packet of fags. The most talked-about aspect of the budget however is the wonderful new ’scrappage’ plan to tempt owners out of their 10 year old ‘bangers’ and into a brand new, environmentally friendly car by offering the £2000 to turn it into a 3′ x 3′ metal cube. Now, before you all rush off to get down to the nearest dealer, let’s see what it’s all about. Apart from being responsible for actually introducing the word ’scrappage’ to the English language, what does it mean to the humble person on the street?So, lets take a deep breath and have a quick look at what’s on offer.

The Scheme:

  • In exchange for scrapping your old vehicle and buying a new one the Government and Vehicle manufacturer will contribute a total of £2,000 towards the purchase of a new vehicle
  • The scheme will run from 18 May 2009
  • The scheme will be available to the first 300,000 eligible claimants or until 28 February 2010, whichever is sooner
  • Participating Dealers will take care of everything for you, including claiming the incentive on your behalf and arranging scrapping of the vehicle

The vehicle you are trading in must:

  • Be a car or small van weighing up to 3,500 kilograms (kg)
  • First registered in the UK on or before 31 August 1999
  • Either be registered or have a SORN (Statutory Off Road Notification) with the Driver and Vehicle Licensing Agency (DVLA) in your name
  • Have been registered to you continuously for 12 calendar months before the order date of the new vehicle
  • Have a UK address on the registration certificate (V5C) in the same name as the new vehicle
  • Have a current MOT test certificate before date of order for the new vehicle

The new vehicle you want to buy must be:

  • A car or small van weighing up to 3,500 kg
  • First registered in the UK on or after 18 May 2009
  • Declared new at first registration in the UK with no former keepers

So, what the government is generously offering is a £1000 contribution to scrap your old car, and the dealer or manufacturer are going to give you another £1000 towards the cost of a brand new car or light van. Before you all start clearing the empty Ginsters wrappers and Coke cans out of your old car, let’s try and see how much of a benefit the scheme is really likely to be. I’ll try and illustrate it with a few examples of the winners and losers. Firstly, it’s important not to panic and rush out to be the first to sign up as it might not be as worthwhile as you think……….

Case 1)

Mrs Jones has owned her Volkswagen Polo 1.4 16v 5 door hatchback since it was 2 years old. It’s a T reg and was registered in July 1999. Although it was almost £13000 when it was new, she bought it for just over £7000 from a dealer after it’d just turned 2 years old. Mrs Jones doesn’t cover a high mileage and although her car had done 20,000 miles when she bought it, over the next 8 years she’d only managed around 8000 miles a year, so it’s covered just over 80,000 miles now. In all the time she’s owned it, the Polo has been utterly reliable and she’s had it serviced every year at Swiftest (so she wasn’t ripped-off!) and it still runs like new. As it’s only a 1390cc engine and is older than 2001, the road tax isn’t based on the CO2 emissions, and so is currently £120 per year. It always does 40mpg and being the top model, it has power steering, electric windows, mirrors and even air conditioning. All in all, it’s a lovely car and really is in beautiful condition. The Polo is such a tough little car that even 15 year old examples regularly sail through the MOT and rarely need any welding or major work. Because of this, the Polo is a highly valued car on the used market, and even though it’s 10 years old, they’re still fetching around £2000 in a private sale.

Over breakfast last week, Mrs Jones’s husband mentioned that the she could get £2000 off the price of a brand new car if she took up their new scrappage scheme. He also found it amusing that he’d never previously used the word ’scrappage’ in his 65 years of living! Anyway, they decided to look into it a bit further.

To replace the polo with its new equivalent, it’d cost as follows:

New Polo 1.4 SE Hatchback £11680.00 (they tried to haggle a bit off, but the dealer mentioned that as part of the scrappage scheme, they already had to give £1000 off!

Less Government scrappage £1000.00

Less (reluctant) Volkswagen dealer contribution: £1000.00

Total cost to get Mrs Jones into a new Polo is therefore £9680.00, or basically all of her remaining life’s savings, currently earning around 0.5 % in her savings account!

Bearing in mind that the ‘new’ Polo has its road tax cost assessed on the CO2 emissions, perhaps she’d make a saving there too? Well, the answer is also a big NO as the Polo is in VED band D as the emissions are 157g/km – the road tax for the new ‘environmentally friendly’ car is £145 per year (pre-budget prices!) If she wanted the ‘greenest’ Polo, she’d need £14200 for the 1.4 TDI ‘Bluemotion’ that qualifies for FREE road tax.

Now, let’s suppose that Mrs Jones still fancied a change, but wanted to save herself a few quid (so she’d have some savings left) and buy a ‘nearly new’ model. A local independent dealer had a lovely 2007 1.4 SE on the forecourt. First registered in April 2007, it was just 2 years old, yet had a screen price of £7995 and had only 25000 miles on the clock with a full service history and one lady owner. As the scrappage scheme didn’t apply to a used model, the dealer was able to offer a small discount of £300 and chuck-in an extra year’s warranty, making the price now £ 7695.00. Although the dealer offered £1000 for her old Polo in P/X, that still left a ‘cost to change’ of £6695.00 which was £3000 cheaper than the new car, even with the discounts! When she arrived home to think about it, one of her neighbours got chatting and mentioned that her 17 year old daughter was looking for a first car. Mrs Jones remarked that she was going to trade-in her old Polo (but didn’t say how much for!) and within a couple of hours, they’d agreed to sell it for £2000. So, without the scrappage scheme, Mrs Jones now only had to spend £5695 of her savings to get the ’slightly used’ Polo, and has saved £4000 over the cost of a new one, with no increase in road tax price or difference in fuel economy!

In summary, the scrappage scheme would’ve cost her a lot more, and gained very little! Onto a very different case now, where the scheme might actually be of benefit!

Case 2)

Mr Ahmed also owned a car made in 1999, but unlike the Polo, it was one of the least desirable used cars! You see, just under 2 years ago, he was looking for a cheap runabout while he finished university and was very taken by a Perodua Nippa (a Malaysian copy on an ancient Daihatsu Mira that had the dubious honour of being the UK’s cheapest car!) that he saw advertised in Loot. The Nippa EX 5 door cost just £4999 when it was new, and thanks to a lack of popularity, hearing-aid beige paintwork, appalling depreciation and zero street-credibility, he was able to snap it up for just £600. Essentially, it’s not actually a bad car, and had proved surprisingly reliable and very cheap to run. Road tax was £120 a year and it did over 50mpg thanks to the asthmatic, wheezing 3 cylinder 847cc engine. It’s never let him down, but now that he’s graduated and has a ‘proper’ job, it’s becoming a bit of an embarrassment in the car park at work, with his colleagues often being less than complimentary about it. The final straw came when they buried it 6 feet deep in snow recently, and it had to be dug out! Now he was earning properly, a new car seemed like a good idea. If he was going to advertise the Nippa for sale privately, he’d be lucky to see £300 for it, and in P/X, a dealer would probably offer him £100 on a good day! Suddenly though, it was worth £2000 and he though that it was his lucky day!

He didn’t want anything too flash, and was quite happy with the size and economy of the Nippa. He’d just like something that’s a ‘known’ brand with a cooler image that’d get some respect from his friends, who wouldn’t be too ashamed to be seen in it. He’d often wondered why his friends never wanted him to drive them when they all went out, even though he didn’t drink!

Although he couldn’t afford anything like a new Fiesta or Corsa, he quite liked the little Kia Picanto and the brand new 1.1 Zapp edition with air conditioning (on his Nippa, you were lucky if the windows opened!) was only £6457.00 on the road! With emissions of only 119g/km, it only cost £35 a year for road tax and still did almost 60mpg. With the £2000 that his worthless Nippa had suddenly become worth, he’s only need to pay £4457.00 to get into a brand new car AND save on road tax. What’s more, the Kia comes with a 3 year warranty, so no worries about breakdowns or MOT failure for the foreseeable future. With a bank loan of £4500 (even at NatWest’s extortionate 16.9% interest!), for just £157 a month, he could have a brand new car.

So, as I’ve rambled on a bit I’ll call it a night now, but you surely get the idea. If you have a worthless 10 year old car such as a Perodua Nippa, Kia Pride, Proton Wira or Hyundai Accent, and want to buy a new ‘budget’ car, you’ll be quids-in going for the scrappage. If you’ve got a desirable 10 year old car that’s still worth something in the private marketplace, and aren’t bothered about having a brand new car, the scheme’s probably not for you.

I’ll save the Prestige car market for another day as that’s an entirely different proposition, as is the fact that 80% of new cars sold in the UK are imported anyway, so there’s little benefit to the UK manufacturers.

Anyway, it’s time to watch Shameless on E4 , so I’m off for a little rest and to catch-up on the illicit antics of the Gallagher and McGuire families on the ficticious Chatsworth estate. The only used cars you’ll normally see on that show are usually stolen, on fire, or a combination of both! Nonetheless, it provides a means of escape from my relatively civilised life, albeit only for an hour.

Bye for now, and please keep reading.

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