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[MSE Guy]

Car scrappage £2,000 damp squib?

Of the new £2,000 for scrapping 10+ year-old cars only £1k comes from govt, the rest from the manufacturer, but we don't know yet if it comes off list price or haggled down price. Plus it's only for new cars meaning there's 15% VAT, whereas you needn't pay this on nearly new.

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[anewman]

The scheme is a waste of time. The manufacturer has to contribute £1000, so the prices of the cheapest cars will go up to compensate. Also, those discounts dealers have been giving to get customers in will soon dry up.

All in all, if you have a banger you want to get rid of, and can afford the extra £6k or so (or was probably going to buy new anyway whether the scheme happened or not), then you may as well go for it. But don't be led in by thinking you're getting a great deal, as you are not.

[Hintza]

Althoiugh I don't agree with Ling's conclusions she does highlight quite a good example of how the manufacturers are going to implement this scheme. Which comes as no surprise to any of us.

Also if a car sells for £5,000 + VAT (£750) then this scheme will only cost the government £250. Obviously over simplified and assumes the buyer wouldn't have bough a new car without the scheme.

[Lemonade Pockets]

Would anyone like to guess my views on it?

[mikey72]

Good scheme, I don't care if it's my VAT they give back, or the mfr's discount is already spoken for, it's all money that I won't have to pay to replace my old car with a new one. The cost of change will be around £5000 for a i10, I don't get the hassle of selling my old car, and I save another £400 on the tax and MOT's, so that'll cover the service costs as well.
I wouldn't have thought of changing for a year at least, then for a second hand car otherwise.

[njsb14]

Some of the deals are not what they first seem. I have taken a look at the Ford Scrappage scheme for the Fiesta advertised on the ford website, says £2000 government scrappage scheme + extra £500 saving, looks good.......

The example they give is the Fiesta Zetec 3dr 1.25 82 PS petrol with Free Bluetooth = OTR £12,295 - £2,500 = £9,795

Now at present you can get the same car from dealdrivers for £10,039 + £135 for Bluetooth = £10,174.

So yes you save £10,174 - £9,795 = £379 by trading in your old car.

BUT the government has put £1,000 into the deal, so Ford has actually raised their prices by £1,000 - £379 = £621 and put NO extra of Ford's money into the scheme.

The real saving will come if the brokers prices are competitive and then the scrappage scheme savings are on top of this, we will have to wait and see.

Another thread also finds worse http://forums.moneysavingexpert.com/...html?t=1653755 that you will pay extra £800 using the scheme on a Ford S-Max. Add in the £1000 the goverment puts into the deal and ford are making £1,800 more on the S-Max than before scrappage.

I know some people will argue that the scheme is to benefit both the Car Manufacturers and the public, but this is all costing us long term in our taxes and most of the Car Manufacturers are foreign benefitting from the UK tax payers.

[jtownson]

I really don't get the point of the scheme at all. You would think that they would tie it in with buying a greener car but no. You could trade in a fiesta for a Hummer if you wanted...not very green at all.

So it looks like the scheme is to keep people in jobs, but have they thought about the effect that this will have on local mechanics / garages who service these older cars? If everyone buys new then trade will drop for the local mechanics which could lead to job cuts again.

Another big question is what happens to the car that gets taken in? Some of them will be perfectly good, usable cars - do they crush them? This would leave a shortage of older cars on the market and push prices up. Leaving the people who can only afford older cars even worse off?!

I am struggling to think of a single worthwhile benefit of this scheme.....

[goldspanners]

theres about 3 or 4 threads on this S crap subject,could they not be combined?

[Savethekipper]

I spoke to the local Nissan dealer about this scheme over the weekend. He says the £2k is off the retail price not the haggled down price. So basically you might as well go in and see what offer they would do for you anyway, it may match the scheme the Gov are offering without all the rigmarole of having to have MOT, tax and having to have owned the car for a certain length of time.

[heather pastor]

i've been 'uuuming & aaarhing' for a few weeks now whether to buy a new Fiat 500, and when this scheme was announced, i thought this would be a great opportunity to trade in my old Fiesta which is on its last legs.

but no...................

apparently Fiat have decided that as the 500 is such a good selling model they are not subscribing to this scheme. To add insult to injury, i was offered a paultry £250 off the showroom price of £11,300 - its not exactly a cheap car either !

seems i can only get this deal off either expensive cars or rubbish models that no one would want. Doesnt seem as though a lot of liason went on with the manufacturers before this scheme was announced.

WILL BE WRITING TO MY MP AND OTHERS TO HIGHLIGHT !!

[shawad]

Originally Posted by MSE Guy

Plus it's only for new cars meaning there's 15% VAT, whereas you needn't pay this on nearly new.

Not true - any VAT registered dealer will have to charge VAT on anything they sell, be that new or nearly new.

[mikeeball]

It should have been simple - you buy a new car at the price shown. and if your car is 10yrs + you trade it in and get 2K off this price. Then the car dealer gets the 2K back from the government.

[noelphobic]

I would have been really pleased had this scheme been available two years ago when I traded in my thirteen year old Nissan Sunny. It failed it's MOT and would have cost £250 to get through it so I bought a year old car. I got next to nothing as trade in on the Sunny and with this scheme would probably have paid less for a brand new car than I did for a year old one.

[smk77]

Originally Posted by jtownson

So it looks like the scheme is to keep people in jobs, but have they thought about the effect that this will have on local mechanics / garages who service these older cars? If everyone buys new then trade will drop for the local mechanics which could lead to job cuts again.

According to a mechanic I know who owns a small garage business is booming because people are holding onto their cars or looking for services away from the dealership to save some money.

Not everyone is going to by a new car. I'd expect very few people who currently own a car that is 10+ years will buy a brand new car. Simply because the type of person that owns a 10+ year old car is more than likely a 2nd hand car buyer. Very few people keep a car for 10 years. Also, take the example of someone who owns a 10 yr old Ford Focus. They probably need a small family hatchback. They're not going to go and buy a Hyundai i10 simply because it'll cost them about £5k. They'll need a new focus or similar for approx £12k.

So, basically, few will take up the offer. If the scheme does manage to restore the car manufacturing industry then all the scheme will be doing is putting the industry back to how it was prior to the recession. The local garage that has benefited from the recession will just tick along as it always has done...

[Pete1234]

I went into a Ford dealer's yesterday (28.4.09) and they will bring their scheme into operation in May. We know they raised their prices by £1000 but they appeared to have dropped these as a "special offer". However the salesman told me that the scheme only works on the proper retail price. This means they will increase the price by £1200 so there goes their £1000 contribution but the other thing that worries me is that I will only be getting £800 from the Government or does Ford charge the Government £1000 in order to pocket the other £200?

[cremator]

The MOT on my 20 year old Polo expired on April 4th. As the scrappage scheme was widely anticipated I didn't renew it. Now it seems that in order to qualify to have my car crushed I have to get new tyres and other stuff (about £250 worth). I emailed my MP (Ruth Kelly) to ask if this wasn't a waste of resources but, of course, she hasn't replied.

[Lemonade Pockets]

Originally Posted by shawad

Not true - any VAT registered dealer will have to charge VAT on anything they sell, be that new or nearly new.

No neither of you are right. VAT is chargeable on all new cars unless the customer is exempt.

VAT is only chargeable on a used car if the first owner was VAT registered and claimed back all the VAT (i don't think it applies to cars where 50% has been claimed). This is only really common on Ex-demo's, courtesy cars and pre - reg's.

A dealer will pay VAT on the difference between the purchase price and new price. But that is not the same as charging it.

[Frogs]

Not sure if this scrappage has to be in all cars sold or just the more expensive ones, but the car manufacturers probably dont make £1000 profit on a basic small car, so if they start giving away £1000 to people then they are going to make a loss....which cant be good either, they might aswell not make them. The German goverment is doing this too, but they pay the full £2000 so the car manufacturers dont have to pay nothing and sales are very good there.
Also i would imagine if your driving arround in a 10 year old car worth £500 there a reason for it.....you dont have the cash to buy another car! If you had a spare £5k to buy a new car now, surely you would have bought a nearly new car a few months ago. Who knows, but we'll find out!

[tightwadman]

I would have been really pleased had this scheme been available two years ago when I traded in my thirteen year old Nissan Sunny. It failed it's MOT and would have cost £250 to get through it so I bought a year old car. I got next to nothing as trade in on the Sunny and with this scheme would probably have paid less for a brand new car than I did for a year old one.

Boi problem with this scheme for anyone like me a car that qualifies by age for scrappage but has been declared SORN. No MOT means you wont be considered and it just isnt worth me MOTing plus insuring my old off road banger and then maybe even find the few poor deals that are available have all gone. Yes another damp squib and a typical piece of labour smoke and mirrors aka deception. I wont be bothering and wlll wait to but a new or nearly new model in August when the car dealers will be more likely to give me a good deal with no more scrappage offers to buoy them up. As for my banger thats going on ebay....

[ray_gillespie]

There seems to be a bit of a myth about not paying VAT on used cars. In reality, you pay VAT on pretty much ANY car you buy, no matter if it's new, 'nearly new' or an old banger. There is no 'extra' VAT added on top of the price of a used car, but the price already includes the VAT that the original owner paid on it, less any depreciation. For example:

John buys a new car for £11,500. This works out to be £10,000 before VAT. The dealer adds the VAT, at 15%, of £1,500. So the total John pays is £11,500. Whatever price you see a new car for, it includes the VAT that the retailer has added. So this car would be advertised at £11,500.

John gets bored with his new car after 2 weeks and decides to sell it back to the garage. He originally paid £11,500 for it and it has depreciated by 10%. He sells it to the garage for £10,350. The VAT is not 'removed' from this. It is already included as he has already paid VAT on the car and cannot claim this back. For all intents and purposes, the full price of the car when new was £11,500. That included VAT, paint, seats, the radio, tyres, everything.

The garage buys it off John and then sticks their profit on top, so they advertise it for £10,500, hoping to make £150 profit.

Peter wants a 'nearly new' car so he buys the car from the garage for £10,500. There is no extra VAT on this price as it has already had VAT paid on it. But that's not the same as saying it's VAT-free. It is VAT-paid, not VAT-free.

There may be exeptions as lemonade pockets says, and the dealer will pay VAT on the difference between the purchase price and new price. But you don't 'save money' on used car because you don't pay VAT on it. You save money because they depreciate in value so quickly.