AM Online

Scrappage scheme is a hit with buyers

The majority of car dealers have reported an increase in new car enquiries resulting from the Government scrappage scheme.

The number of orders for new vehicles has topped 50,000 since the scheme was introduced, according to figures released by the Department for Business Innovation and Skills (BIS).

Early winners include niche brands such as Suzuki, Kia and Hyundai, seeing drastic increases in market share.

Suzuki reports more than 2,100 orders since the launch of scrappage on May 18. In May 2008 its market share was 0.97% on 1,732 registrations.

Suzuki sales and marketing director David Seward said: “Registrations across the whole range are climbing steadily as customers take advantage of the attractive savings on offer, in addition to our popular zero per cent finance schemes.

Our dealers are reporting greatly increased showroom traffic and some are experiencing a fourfold increase in orders.”

Scrappage sales have given Kia a market share of 5%, with 7,000 orders.Kia’s May 2008 share was 1.54% on 2,764 registrations. 

Hyundai’s scrappage sales total more than 8,000 units – a market share of 3.5%. Its 2008 May share was 1.36%
Research by AM and the National Franchise Dealers Association reveals 92.8% of dealers reporting an increase in enquiries on new cars as a result of scrappage, with middle-aged cash buyers making up the majority of customers.

The survey – live on am-online.com/news – asks dealers to gauge the scheme’s impact since launch last month, as well as who is buying, what they are buying and how they are paying for the vehicles.

 

Key findings on impact on sales:

  • 48.5% of the vehicles being bought under the scheme are priced between £6,000 and £8,000. 22.1% are priced between £8,000 and £10,000.
  • 66.9% of vehicles bought under the scheme have 1.0–1.3-litre engines.
  • 19.1% of vehicles being bought have 1.3-1.6-litre engines.
  • 63.7% of buyers under the scheme are aged 45–60 and 27.1% 31-45.
  • 54.7% of dealers said less than 25% of purchases use consumer finance.

On impact on businesses:

  • 69.2% of dealers say their manufacturer has made the terms and conditions of the scrappage scheme clear and easy to follow.
  • 70.4% are expected by their manufacturer to financially contribute to the cost of using the scrappage scheme.
     

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The Ford Ka and Fiesta, Honda Jazz, Hyundai i10, Kia Picanto, Nissan Micra, Peugeot 107 and Suzuki Alto are most in demand, say dealers.

Research by Experian backs up the dealer experience. It says people approaching retirement age are most likely to be attracted to the scrappage scheme.

Experian identifies 7.1 million vehicles in the UK that would be eligible for the scrappage scheme – vehicles that were first registered more than 10 years ago and owned by the current owner for at least 12 months.  

However, its analysis also highlighted the fact that the scheme would be affordable to the owners of only 1.5 million of those vehicles.  

According to the company’s latest analysis, 18% (270,000) of the owners of the 1.5 million vehicles fall into the ‘close to retirement’ group. They are mainly consumers aged 45-64 with more than one car per household.  

These consumers are likely to buy their car from main car dealers, tend to favour the supermini and MPV segments and see brand image as an important factor when buying a car. 

Kirk Fletcher, managing director of Experian’s business information and automotive businesses, said: “The biggest market for the scrappage scheme are those people close to retirement with an eye for either an economical supermini or MPV. 

“This is potentially good news for the likes of Honda, Mazda, Toyota and Renault who could use this insight to help them on the forecourts.”

German brands like BMW and Mercedez-Benz are most popular with the 1.5m people most likely to be able to afford taking up the scrappage scheme.  

The scheme has stimulated online activity in the automotive sector and these brands were among the top 10 most visited manufacturer websites.

Dealers’ comments from the AM/RMIF scrappage survey

“It is a pity to see some of the 10-year-old vehicles being part-exchanged are in excellent condition, with Ford Puma, BMW 325i, Ford Scorpio and other cars being scrapped when there is clearly useful working life left in them.”

 

“All the manufacturers we represent seemed to read the Government specification differently and, in the end, they all converged. There was too much hearsay, conjecture and backtracking to be effective leaving some customers in the lurch. Even now, there is still a number of grey areas where we are taking a punt on how to handle certain scenarios.”

“You need to be extremely careful with the paperwork to ensure the subsidies are paid.”

“The scheme turned our business around overnight.”
“It’s an administrative nightmare, especially having to keep paperwork until 2017. The burden is on the dealer to get everything right, so we are cherry picking deals.”

“The £2,000 debt is left for the dealer to chase, no margin on cars sold, no opportunity to retail part-exchange or even sell it for scrap since the manufacturers are taking the cars back. If manufacturers have the money to throw at the scheme, why not throw it to customers who we might see more than once every 14 years and whose cars we can re-sell?”

“Sales appear to be incremental.”

“There is a serious erosion of dealer margins taking place, coupled with aggressive discounts advertised in national press and manufacturer websites eroding margins further.”
 

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