What is a Car Scrappage Scheme and How Might it Work in the UK
Put simply a car scrappage scheme is where the government gives you money when you get rid of your old car and buy a brand new one. Usually there are a number of conditions placed on the scheme, such as a minimum age for the older car that you wish to scrap. There are supposedly a number of benefits to this sort of scheme, both financially and environmentally
Financial Benefits to Car Scrappage Schemes
For the car consumer there is an obvious benefit. They get a nice tax free lump sum of money that helps them purchase a new car. Also it means that they also do not have to pay to have their old car scrapped, possibly saving additional money.
However if the old car is in a reasonable state then the benefits may not be so great as the car HAS to be scrapped, it cannot be resold. In some countries a car scrappage scheme is worth around £2000, but some cars, even ones 10 years old, may be worth more than that.
For the car industry as a whole a car scrappage scheme may go some way to reviving an ailing industry. People may be encouraged to buy a new car this year, thus helping to prop this industry up further. With car sales down at least 30% and with a whole load of car workers being made redundant or forced to work shorter hours, then this may be the shot in the arm that is needed to help our manufacturing base here in the UK.
Financial disadvantages to Car Scrappage
If a car scrappage scheme was introduced in the UK it is not clear how much of the government money would remain in the UK. Reports suggest that 85% of all cars bought here in the UK come from abroad, so only a small proportion of the financial assistance will remain in British pockets. However a larger proportion of car parts are made in the country so the entire financial picture is not quite as clear cut as that. Also all the scheme may succeed in doing is bring forward car purchases from 2010 and 2011 into this year, thus helping things to improve this year, but destroying future car sales.
Environmental advantages of car scrappage
Usually the old car will have to be scrapped completely for the car scrappage rules to apply, i.e. it can't be sold on to anyone else. The idea being that paying for you to scrap your car in this way will remove an old inefficient car from the roads, thus reducing the overall carbon footprint of our rolling stock of cars. In principle this could be a sound idea, with most modern cars being far more fuel efficient than their older counterparts, and producing far less toxic emissions.
Modern cars can easily obtain up to 40 miles to the gallon, and produce far less NOx, sulphate and other trace toxins in their emissions.
Environmental disadvantages of car scrappage
Unfortunately with all things environmental it isn't exactly clear that the scheme will help our UK carbon footprint.
- The old cars generally have to be scrapped completely, creating additional waste to
go in our landfill (although as much as possible will be recycled). - The carbon cost of building a new car is very high, typically the amount of carbon emitted during the manufacture of a modern car is equivalent to driving 50,000 miles!
- There often is no minimum requirement on the number of miles the old car has travelled before allowing the car scrappage. So a top condition high efficiency car that is only 10 years old could be scrapped even if it has driven only a few thousand miles
- The car scrappage scheme does not usually stipulate the required fuel efficiency of the new car, so people could swap out a sensible (albeit old) fuel efficient car for a gas guzzling 4x4
Car Scrappage in the UK
So will the government introduce a car scrappage scheme? The budget on the 22nd of April could tell us more information, and we will update this page as soon as more information is available.
It is possible that the UK government will add their own finishing touches to the standard car scrappage scheme, such as only applying it to cars that have done a certain mileage, or only allowing the scheme to apply if buying a fuel efficient car (e.g. one of the cars in the lower car tax bands).
It is very unlikely that they will apply a car scrappage scheme that only applies to cars manufactured in the UK, as that would probably contravene EU anti-competition laws, and would certainly be against the spirit of no protectionism.
We shall have to wait and see...
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