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Scrappage scheme: The used car view

CAP believes the scrappage scheme will have a limited impact on both the new and used car markets. 

It said: “The bulk of new car demand stimulation will be for the cheapest small cars and consumers currently running cars of 10 or more years old are likely to require significant finance over and above the £2,000 voucher.

“By definition they are likely to be sub-prime finance
customers. This area of finance provision is subject to the greatest caution among providers. A proportion of those qualifying for the scheme may therefore still be unable to acquire the finance.”

CAP is also doubtful many LCV customers with vans that qualify for the scheme will switch to a new vehicle.

CAP said: “Any nearly new car or van of the type for which most new vehicle demand will be stimulated will see its value reduce. Residual value reductions will be limited to later used
examples of the cheapest small new vehicles.”

Glass’s predicts that scrappage is unlikely to have a significant impact on the residual values of used cars.

Adrian Rushmore, managing editor, 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."

Rushmore believes most of the manufacturers’ share of the £2,000 scrappage bonus is already on offer in the form of sales discounts and incentives, and their £1,000 contribution to scrappage will largely replace these incentives.

“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.

“Manufacturers may also seize the chance 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.”

Manheim's group sales director John Given said: “The scrappage allowance could reduce our lower value part-exchange volumes coming into Manheim Auctions, but we do not believe this impact will be significant. However, any increased retail activity as result of this allowance will positively affect the marketing support provided to dealers through Manheim Retail Services.”

BCA said the impact of scrappage will be unclear. “The big question is how many existing private owners of 10-year-old cars or vans will be in the market for a genuinely new car or van,” said Tony Gannon, communications director.

He warned there may be an adverse impact on demand for nearly new cars, as those private buyers who do qualify might switch into buying new rather than used.

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