A car ‘scrappage’ scheme could benefit fleets by increasing residual values if the Government gives it the go-ahead, claims the British Vehicle Rental and Leasing Association.
There have been a growing number of calls across the industry for motorists to be handed a fixed fee for trading their old car in for a newer model.
Manufacturers believe the measure would kick-start the motor industry, which has seen sales plummet during the past few months.
“For a scrappage scheme to benefit fleets it would have to include incentives for people scrapping older cars to buy new and nearly new cleaner vehicles,” said John Lewis, chief executive of BVRLA.
“This would see fleets obtaining better prices for their one, two and three-year-old vehicles, and give them the confidence to go out and buy new cars and vans.”
In January, the German government started offering buyers of new cars a £2,500 cash incentive to trade in a vehicle more than nine years old, resulting in a 21% increase in new vehicle sales in February.
Speaking at the recent BVRLA dinner, Nigel Stead, chief executive of Lloyds TSB Autolease/Lex, said any UK scheme would have to encompass used cars up to four years old in order to make it a viable proposition.
“Unlocking the used car market would, in our view, be the most efficient way to affect positively the new vehicle market,” explained Stead.
Lewis added: “This sort of scrappage scheme would accelerate the recovery in the used car market, which would benefit leasing companies.
“A sustained recovery in used car prices might also convince risk managers at some of the leading funders that motor finance is not such a risky business after all.”
Emmanuel Lewis, fleet manager at Vista Retail Support Ltd, would welcome the initiative if it was “correctly administered and fairly run”.
However, Emmanuel Lewis doubted its affect on residual values if the supply of what the “£500 car” runs out and that’s all somebody could afford.
“Either you price out of the market a whole group of people from car buying or car prices fall to fill the gap, and if that happens it will affect all car values,” added Emmanuel Lewis.
A spokesman for the Department of Business, Enterprise and Regulatory Reform, said: “The automotive sector has put proposals for a scrappage scheme to BERR and we are considering these.
"The proposals are potentially costly for the taxpayer and they need careful examination.
"But, we are working closely with the industry to assess the costs and evidence on impact.”