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Scrappage scheme: Unravelling the complexities

Vehicle manufacturers signing up to the Government’s scrappage scheme could withdraw after a minimum of three months.

The contract includes an option to pull out of the initiative on giving three months’ notice. Manufacturers not signed up ahead of the launch can join at a later date on giving one month’s notice.

AM understands Honda has volunteered for scrappage, but has already issued its three months’ notice in case the scheme does not prove profitable.

The move has caused some confusion among its dealers, who have also been asked to contribute £500 of the carmaker’s £1,000 scrappage contribution on the small cars in its range.

One source said: “If manufacturers were being strategic about this, they could join at the start for three months, exit, then rejoin for the end of the year to benefit from any increased demand ahead of the rise in VAT to 17.5% on December 31.”

However, industry observers suggest doing so would further complicate a complex initiative, with consumers still largely in the dark about how the scheme works, which manufacturers are taking part, and whether their old car is eligible. 

The AM Scrappage Briefing at the Society of Motor Manufacturers and Traders’ HQ, with support from MSX International, highlighted some of the opportunities the scheme presents to franchised dealers.

The industry’s feeling is that the scrappage scheme will help, but falls well short of what was wanted. The SMMT had lobbied for an 18-month scheme with a £2,000 discount funded by the Government on new and nearly new cars and vans. Instead, it will operate for nine months, only apply to unregistered cars and vans and comes with a £1,000 state contribution matched by a £1,000 from the carmaker.

Discussions with the Government

Paul Everitt, SMMT chief executive, said its “frustrating discussions” with the Government would continue. “From the manufacturers’ perspective the cost and availability of finance is not where we would want it to be. We will continue to push on this issue.

“I believe that with the scheme in place we will start to see some improvement. As we push forward to the turn of the year and growth returns I hope we will be better placed to take advantage of it.”

Kieren Puffett, editor of car buyers’ guide Parker’s, said he believed some consumers had put off buying in anticipation of a scrappage scheme, so the launch should now bring an uplift in sales for dealers.

Scrappage is expected to bring an increase in showroom footfall. However, dealers would need to be “well armed” with knowledge, as the scheme is confusing, Puffett added.
One of the biggest disappointments is that scrappage does not apply to nearly-new cars.

“A lot of people will say they can’t make the jump from a 10 year old car to a new one,” said Puffett.

Scrappage audit trail

A Government audit of the scrappage scheme is expected after two months, and again at the end of the initiative. 

Dealers must hold on record a copy of the V5C registration certificate for the old vehicle; the MoT certificate (or the Hackney Carriage Licence as appropriate) for the old vehicle; a copy of the invoice for the new vehicle; details of the new vehicle, including the registration number and VIN; and a copy of the
certificate of destruction for the old vehicle.

The scrappage scheme process

  • The dealer verifies the consumer is eligible for the scrappage discount.
  • The order is placed and the dealer completes a data sheet stating the customer’s details, dealer’s details, old vehicle’s make, model, registration and VIN, new vehicle order date and proposed delivery date. This is submitted to the vehicle manufacturer, which tells the Government of its scrappage scheme orders every Wednesday, at which point the Government contribution is ring-fenced.
  • The dealer must get the new vehicle within four months.The dealer sends its manufacturer a further data sheet with the new vehicle’s registration number, VIN and CO2 emissions and date of delivery, the old car’s certificate of destruction number, ATF where it was scrapped, MoT certificate number and MoT expiry date.
  • The manufacturer sends the Government these details. It will receive the Government’s £1,000 within 10 working days. The manufacturer must then pay the £2,000 total scrappage contribution to the dealer within a further 10 working days. 

Scrappage fact file

  1. Scrappage scheme starts on May 18 and ends on February 28 next year.
  2. The £2,000 discount is applied to the invoice price including VAT. In effect, the Government’s stated £1,000 contribution is £870. As a result, the Government will actually gain from the scheme.
  3. Manufacturers can issue three months’ notice to leave, or one month’s notice to join.
  4. Participation is voluntary, so dealers can negotiate an opt-out with their manufacturer.
  5. The same name must be on the V5 for the old and new vehicles.
  6. At the point of order the old vehicle must have a valid MoT or one that expired no more than two weeks previously.
  7. The old vehicle must have a valid tax disc or be declared SORN. Once the transaction is complete the disc may be removed to claim for a refund.
  8. The new car manufacturer’s ELV authorised treatment facility (ATF) will collect the old car at no cost to the dealer. A copy of the certificate of destruction (CoD) will be provided within three days.
  9. Alternatively, the dealer may sell the old vehicle for scrap, providing he gets its CoD.

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