AM Online

Scrappage scheme unlikely to impact used car residuals

Glass’s, publisher of Glass’s Guide, is predicting that the vehicle scrappage scheme announced in the Budget is unlikely to have a significant impact on the residual values of used cars – of any age.

Some industry commentators have suggested that the prices being asked for nearly-new cars (i.e. those under one year of age) would appear prohibitively high next to the price of new cars discounted under the scrappage scheme.

However, according to Adrian Rushmore, managing editor at Glass’s, prices for used cars are unlikely to be negatively impacted.

He said: “The majority of consumers already interested in purchasing a nearly-new car will not be existing owners of cars 10 years or older, and will therefore not be eligible for the scrappage bonus.

“For this reason demand will not switch from late-plate to new vehicles, harming late-plate values.”

Rushmore believes that most of the vehicle manufacturers’ share of the £2,000 scrappage bonus is already on offer to potential car buyers in the form of sales discounts and incentives.

He said: “The manufacturers’ scrappage bonus will largely replace these incentives, not supplement them, and today’s used car values already take full account of current low transaction prices on new cars.

“The scrappage scheme is likely to increase demand for new city cars and superminis more than any other type of car. Many of these cars are already in limited supply, and the expected additional demand will merely serve to extend delivery lead times. Customers not eligible for the scheme will also find themselves joining lengthening queues, and are therefore more likely to consider a late-used alternative.

“In addition, manufacturers may also seize the opportunity to increase list prices on those models in the highest demand. These factors will conspire to support – or possibly even promote – prices for the nearly-new small and lower-medium car.”

These factors all point to the scrappage scheme having very little impact on the used market over the coming months, concludes Rushmore.

“While we expect values to ease back during the summer months – as they would during any typical year – we do not forecast any further increase in rates of depreciation as a result of the introduction of the scheme,” he added.

Rushmore will be one of the speakers at AM's Autoretailing event and will be giving his views on the used car market and scrappage on June 4 at the Hilton Metropole in Birmingham. Head to www.am-online.com/autoretailing for more information.

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