Sunday, Apr 12, 2009
More bail out nonsense
This is Money: Car scrapping £2,000 bounty gets green light
Motorists will be promised a £2,000 bounty for scrapping old cars in the Budget, ending months of debate between MPs and the motor industry, it has been claimed.
A controversial 'scrappage' scheme will finally be announced by Chancellor Alistair Darling in the Budget later this month, in a move that will mirror a successful German scheme.
Posted by peter_2008 @ 02:28 PM (1640 views) Add Comment
17 Comments
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1. peter_2008 said...
This is not going to work in this country. The government just don’t get it. We are different from Germany and France.
People in Germany and France buy cars with cash. They don’t need borrow (too much) money to buy. The Brits do. Guess how on the earth could the Brits buy more BMW than the German and French combined? More convertibles than the German and French combined? More 4x4 than the German and French combined? Because we just kept borrowing!!
And where can we borrow money now? Oh, yea, from newly printed BoE Monopoly money and from banks injected with taxpayers’ money. Yea, that’s just genius.
2. stillthinking said...
The problem with the UK is that the average Brit does not believe that governments spend the populations money, rather that government money comes from somewhere else. Maybe they will in future years.
The reason why this works to increase sales is because it transfers money from those who don't buy new cars to those who do, as all share in the subsequent tax bill. Accordingly the richest, being the most able to stump up the additional costs, will benefit at the expense of those too poor to buy cars even with the subsidy. Further, as has been pointed out, most people choose imported cars, so if this scheme is a run-away success then sterling will suffer.
I live next to a somewhat ropey second-hand car dealer, and all of cars on the forecourt are in the 1K-2K range. It is such a crazy idea it will interesting to see the affects on current free market pricing. Certainly prices will adjust to reflect new realities. We already know the price of 9+ year old cars, so probably 3-8 year old cars are going to lose value from this. Perversely, the losses in that range, which are used to support new purchases, might kill more demand than is created ! You never know with New Labour what sort of back-firing to expect! God bless them.
3. Chris said...
There is always more than one reason for NeoLabour to choose to do something. In this case all new cars now are automatically fitted with tracking technology allowing their position and movements to be monitored. So in one move they are providing an illusory boom in the new car market with taxpayer money and also massively increasing the number of vehicles they can track. Economic illusion and surveillance society - I think that sums up Neolabour pretty well.
4. quiet guy said...
Stand aside free market. Make way for Nulabour. Will old cars suddenly be sought after by those who want to buy new and take advantage of the discount? This is insane economics.
5. Fly By Night said...
Who's going to pay for this? The taxpayer? Me, included. I don't even drive! Why should I pay for this?
6. stillthinking said...
I had another thought on this. Basically it will work out the same as dropping VAT from car purchases, or a tacit admission that taxes have risen past the point of maximising revenue.
7. little professor said...
This won't be as successful as it has been in Germany, for one simple reason - we don't have any proper british car companies. The handouts will simply be spent of 'foreign' cars (even if they are made in this country) and the funds will flow overseas. Meanwhile British service and repair centres will suffer.
8. inflation is eating my savings said...
Ah, the integrated transport policy.
This is "more stitches less riches" in the extreme. Built-in obsolescence fails to keep us out there buying stuff.
And what idiot is going to trade a perfectly functional 16 year old citroen ZX turbo diesel, only have to buy a new one at a suddenly inflated value?
Many presumably.
9. Poacher said...
Little professor, this is more complex than it looks. Firstly, the majority of vehicle manufacturers are either run at a loss (GM, etc.) or at a barely break-even. This means that when BMW build a mini in the UK or Nissan/Renault build a Micra or Vauxhall... you get the picture, very little, any of the sticker price makes it back as profit to the parent company. The servicing of debt taken on to meet capital-costs and labour costs make up the vast majority of the figure, so a stimulus to the car market actually diverts tax money to the lenders and the workers more than to overseas manufacturers. I believe the real reason for this is to improve the money supply. Mortgage debt has shrunk as a motor for the money supply and another kind of secured debt needs to take up some of the slack. Motor leasing is ideal - the manufacturers are on the brink, so they are likely to be willing to underwrite the risk via their finance arms, with the actual credit being provided by the banks who are presented with a lowish risk opportunity (if the buyer defaults it's the manufacturers problem, if the manufacturer defaults the bank will reach over them to hammer the buyer and then if needs be take the car). The sums of money involved, if borrowed, are significant boosters for M4. Money growth, GDP growth and debt growth are, after all, very nearly one and the same thing. Hence politicians love of housing booms (with the attendant feel-good illusion being a side-benefit) .
10. p. doff said...
Well, I was thinking of buying a new car next month and trading in my 8 year old mondeo, but will now defer this to get the higher price.
11. Yoss said...
What is the Avg VAT take on the avg car purchase?
12. Maihem said...
Can you buy an old car and then scrap it straight away for the coupon? That would just generally increase the price of old cars to fund the purchase of road-legal quad bikes or mopeds. This policy could cause the price of fuel to plummet as demand performs a high-speed face plant into the asphalt.
It would also devastate the raw materials producers.
13. scandinavian pessimist said...
This will work. Sweden had a similar scheme for several years (although you didn't get as much as £2k, more like £1k in todays money) and it had a real effect. Loads of people traded to buy something better and it cleared up the streets from rusty old dangerous crap.
14. gone-to-colombia said...
What irritates me about this proposal is that it uses tax payer’s money to support those who are clearly better off, in a luxury purchase, when most will be struggling just to survive.
The present approach to the economic rectification is to attempt to try to save everything, to maintain the status quo. Keynesian economics now seems to be in vogue, the exemplar of that doctrine in action, the 'New Deal' never attempted such a mission impossible. It would be far better to let the pieces fall and then try to pick up what is then seen to be worth saving.
15. it_is_going_with_a_bang said...
Now I've said this before. Some people that have rusty 10yr old cars do buy new - but not many.
So dont expect it will make much difference - this is the UK not Sweden.
The manufacturers that are now giving 2k discounts ( I got a 7k discount ) will just stop giving the discounts so it wont make any difference.
What about the second hand car industry / parts / repairs etc. I assume they will lose out in all this as the punters money will go straight past them into flashy dealerships. Is it really such a good idea? Or is it headline grabbing ill thoughtout political meddling?
This is tax payers money being used to buy new cars for people. If the money was being used for electric / hybrid cars then fair enough in my books - but just new cars?? Doesn't make much sense.
16. George said...
This will merely increase the price of new cars by £2,000 whilst by taking out of circulation good second hand cars it will also make it less affordable to buy second hand cars for the majority of people.
It is also wasting our taxpayer money to subsidise foreign car manufacturing since the British mostly purchase foreign cars.
17. uncle tom said...
The UK is pretty much alone when it comes to its motor market..
..we have those that buy new
..we have those that buy young used
..and we have those who run old bangers into the ground
What we don't have (in any significant number) is people who buy new cars and then keep them until they are scrapped.
By embracing such a scheme, the government is showing its total detachment from the reality of the people it is supposed to represent...