Fleets and leasing companies will be watching auction halls closely over the next couple of months to see whether the healthy demand for used stock starts to wane as consumers’ heads are turned by deals for new cars.

Gauging whether this will be the case will be difficult – many experts expect prices to flatten anyway as the leaps in values of every month this year prove unsustainable, but judging whether scrappage is having any effect and, if so, how much, will prove difficult.

Certainly the BVRLA is unimpressed that the health of the used market, vital to the fleet industry, has been largely ignored. Chief executive John Lewis said: “The Government risks damaging the UK’s vital used car sector. 

“It seems to have ignored the close link between the new and used vehicle markets.

“By focusing on new cars alone, the scheme is likely to stifle the recent recovery seen in used car prices as buyers rush to showrooms to enquire about cars they probably cannot afford.”

ACFO chairman Julie Jenner agrees with the BVRLA that potential used buyers will be seduced by new metal. 

She said: “We fear that by only including new vehicles within the scrappage scheme, demand for ex-company cars and vans will suffer as consumers turn their attention to new cars to obtain the incentive. This will obviously hit residual values.”
However, Glass’s believes values will not be affected because scrappage will bring new consumers to the car market who would not have conceived entering it before, leaving the dynamics of the used market untouched.

CAP believes the scheme will have a limited impact on the used car markets, principally because it doubts it will have much influence on new car sales. 

The bulk of new car demand stimulation will be for the cheapest small cars – not an area in which many fleets have a great deal of exposure – while it believes that consumers currently running 10-year-old cars are likely to require significant finance over and above the £2,000 voucher, with many of them sub-prime customers already finding it hard to obtain funding.

CAP retains its scepticism for the commercial side of the scheme too, reasoning that many tradespeople with 10-year-old vans will struggle to switch straight into a new vehicle, due to the same financial factors as private buyers.

However, it does reiterate that there could be residual value casualties if the scheme takes off for a particular manufacturer or model, adding that any nearly-new car or van of the type for which most new car demand will be stimulated will see its value reduce.

Impact on daily rental

With rental firms already struggling to find enough cars, there are fears that manufacturers might shift what little volume there is available further away from daily rental, causing the industry more problems.

However, many in the industry are unconvinced that the scrappage scheme will have an impact as funding becomes an issue for many buyers.

John Lewis said: “We believe this scheme is likely to be a relatively short-term initiative that is unlikely to affect the availability and choice of smaller, low-emission rental cars.
“Most rental companies are extending their replacement cycles so shouldn’t have any significant vehicle supply problems.”

Environmental impact

With experts estimating that around 50g/km could be saved through the replacement of a 10-year-old vehicle with a roughly equivalent new model, many have said the scheme will promote a cleaner transport network.

However, the lack of any CO2 limit to what can be bought – left out principally to allow the likes of Jaguar and Land Rover to participate – is a missed opportunity, some believe.

Julie Jenner said: “We are disappointed that the scrappage scheme is limited to new cars and vans and has no environmental component that encourages the uptake of low-emission vehicles.

“We had promoted a scrappage scheme incentivising the purchase of vehicles up to four years old, powered by engines that meet Euro 4 emission standards and with a CO2 figure of 165g/km or less.”

Professor Stephen Glaister, director of the RAC Foundation, called it “a missed opportunity”, adding: “Currently the vast majority of cars are still on the road at 10 years old. Indeed, at 14 years old half are still on the road. 

“The scrappage scheme announced risks consigning a lot of perfectly good, and relatively clean, vehicles to the dustbin.”
It is not just tailpipe emissions that have been seen as a missed opportunity. Unlike cars of today, of which 80-90% can be recycled, the materials in older cars are unable to be reused, leaving an environmental cost.

Andrew Davis, director of the Environmental Transport Association, said: “To describe this scrappage scheme as environmentally friendly is not just greenwash, it is hogwash.
“Many 10-year-old cars have plenty of life left in them, so from a climate perspective, to scrap them is money poured down
the drain.”

What are the manufacturers doing?

Audi Plans to take part. It is asking interested customers to register at its website and will update them with more information when available.

 

BMW It will join the scheme, offering finance packages with scrappage allowance as a deposit on some models.

Citroën In addition to the £2,000 scrappage discount, Citroën is offering an extra £1,000 on cars registered between January 1, 2000, and December 31, 2002, and £750 on cars registered between January 1, 2003, and December 31, 2004.

Ford Will offer scheme across range of vehicles. Plans to offer ‘Scrappage Plus’ on larger vehicles which boost the size of the discounts above the £2,000. Starts at an extra £1,250 for a Fusion rising to £3,000 for a Galaxy. Total discount available on Mondeo will be £4,500.

Hyundai Will enter the scheme, but exact details yet to be announced.

Kia Dealers are ready to take orders now under the terms of the new scheme.

Nissan All of its models will be available in the scheme. Nissan is extending the £2,000 offer to models aged 8-10 years old for customers choosing one of its British built cars – Micra, Note, Qashqai and Qashqai+2.

Peugeot Will participate but wants customers to register interest on its website. A 107 is featured in its scrappage scheme marketing in this week’s newspapers.

Renault Twingo, Clio, New Kangoo and New Mégane, plus LCV ranges will feature in the offer, with Renault offering more than its £1,000 required contribution on some models.

Toyota Is working on a package to offer British-built Auris in the scheme. Details will be “announced shortly”.

Vauxhall Will enter the scheme, but currently reworking original plans due to the 50:50 manufacturer/Government contribution.

Volkswagen Currently scrutinising the proposal.

Volvo Available on all new Volvos; additional desposit contriobution if car is bought on manufacturer finance. For example, on the C30 Drive S customers will get an extra £2,027 on top of the £2,000 scrappage allowance.