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Scrappage Means New Car Buyers Miss Out On Cheap Deals

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http://business.timesonline.co.uk/tol/busi...icle6481949.ece

Car buyers trading in old vehicles for new ones under the Government’s scrappage scheme could end up losing money because dealers are refusing them access to cheap finance deals.

Manufacturers who normally offer loans with interest rates as low as 3.9 per cent are charging customers on the scheme up to 10.4 per cent. Drivers could be better off ignoring the £2,000 grant and obtaining a more competitive finance deal after selling their old car separately, according to a study by Parker’s car price guide.

Manufacturers had protested to the Government about having to fund half of the scrappage grant but they appear to have found a way of making their money back.

Toyota normally offers finance deals with rates between 3.9 per cent and 5.9 per cent APR — depending on the length of the agreement and deposit. But with cars bought under the scrappage scheme, the only option is a rate of 8.9 per cent. This means that a new 1.8-litre T2 Avensis with an on-the-road price of £16,565 should drop to £14,565 with the £2,000 cash-for-scrap offer, but eventually costs £17,264, £699 more than the list price.

When buying a Ford Kuga with finance under the plan, buyers are forced to take an interest rate of 7.9 per cent. The 2.0-litre TDCi 2WD Titanium model has a list price of £21,795, which falls to £19,795 with the scrappage discount. However, paying such a high interest rate means a final total of £22,903.

Under the normal finance agreement for a Kuga the interest rate is as low as 3.9 per cent. Although a deposit needs to be paid on this agreement and it is over 25 months instead of 36 months, payments are lower each month and the final amount paid is also lower at £22,792.

Drivers buying a new Seat under the scrappage scheme with finance may also end up saving little or nothing. Selected models are being offered with 0 per cent finance outside the scheme but 8.5 per cent if the driver applies for the grant.

The Society of Motor Manufacturers and Traders said: “Unlike most European scrappage schemes, which are entirely funded by government, the UK scheme demands an industry contribution of £1,000 to match the Government’s own input.

“In some cases, where manufacturer profit margins are low, they are not able to offer additional incentives which may still be available on non-scrappage models and this may be reflected in the finance arrangements.â€

Inevitable and in fact, deliberate.

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I have first hand experience of this and can vouch for every word of that article.

The deal on my Focus completely snotted the scrappage scheme deal.

Better car, more toys, 0% finance, cheaper price.

I notice Fiat are now charging 7% on their smallest runaround under the scrappage deal.

So they get their money back plus some.

Im 43 and i dont think Fiats have ever been subject to anything other than 0% deals in my adult life.

Even SAAB had to do it for a while.

I understand Ford have actually abandoned the scheme now.

A scheme dreamt up by people with NO experience of how most folk live.

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It was a scheme that was doomed to failure from the outset.

Any idiot could see that.

What does that say about its creators?

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So, all in all the only people to benefit from the scrappage scheme are those who normally drive a car of more than 10 years old AND who have the cash to buy outright? I guess the early success of scrappage will fade pretty quickly if this starts to be seen as a con.

Edited by council dweller

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Motive and purpose?

From here it just looks like standard idiocy.

The goal was to launder a large amount of cash via this scheme. The government figures and the day to day experience will not tally, mark my words.

Last minute looting, I guarantee but can't prove.:)

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So, all in all the only people to benefit from the scrappage scheme are those with normally drive a car of more than 10 years old AND who have the cash to buy outright? I guess the early success of scrappage will fade pretty quickly if this starts to be seen as a con.

That'd be me then. And not only am I not normal (stop sniggering at the back, I mean there cant be many people like me), I'm also not going to be taking them up on their offer.

Also, innumerate, easily lead idiots keen to take on huge debt but not bright enough to work out that this might not be the best idea for them or that there might be a cheaper deal out there. With this in mind, I think the scheme will be a success.

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I would have thought that the way to do this is to do the deal and throw in the scrappage at the last minute.

If the dealer wont do the deal, then there are 50,000 others looking for your business

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I've always been confused by the whole idea, since it depends on people who drive 10-year old cars being the sort of people who buy new cars. My cognitive dissonance is tingling...

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The goal was to launder a large amount of cash via this scheme. The government figures and the day to day experience will not tally, mark my words.

Last minute looting, I guarantee but can't prove.:)

The goal of laundering money is to take money obtained by illegal means and "legitimise" it and your ownership of it by giving it a trade history. I'm not sure how that applies in this case.

Are you saying that the govt will claim to have spent X but in reality will have spent less? Where will the excess go?

We cant be talking about national book rebalancing since the amounts would be too small so are you saying individuals would be syphoning this off?

Who GB? By what mechanism?

Its an interesting theory but I just don't see how it could/would be done.

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The goal of laundering money is to take money obtained by illegal means and "legitimise" it and your ownership of it by giving it a trade history. I'm not sure how that applies in this case.

Are you saying that the govt will claim to have spent X but in reality will have spent less? Where will the excess go?

We cant be talking about national book rebalancing since the amounts would be too small so are you saying individuals would be syphoning this off?

Who GB? By what mechanism?

Its an interesting theory but I just don't see how it could/would be done.

Government money - scheme - private individuals money - kickback to Mp's.

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Government money - scheme - private individuals money - kickback to Mp's.

Sounds like fairly small sums for such a big risk if caught. I find it hard to believe that ministers would risk careers over such paltry amounts... oh, wait...

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That'd be me then. And not only am I not normal (stop sniggering at the back, I mean there cant be many people like me), I'm also not going to be taking them up on their offer.

Me too. My 14 year old Rover would be an ideal candidate but even even if it gives me serious problem I don't think I'll be tempted. I've also got a Nissan Serena as a back up so wont be stuck.....and anyway, something better will come out next year!

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When the program was initially announced, the Auto industry expected it to be the same as the German program, fully government funded, and around 2500 Euros.

As soon it became apparent that it was 2000£, half funded by the industry, there was resounding, don’t be ******* stupid, there is not going to be anymore money for marketing incentives from us.

The initial plan was to make this 1k come from modifications of the marketing programs and other incentives on offer at the time, at no additional cost. In the case of Ford it was £275 from the dealership and the rest out of the finance packing and direct marketing discounts.

The government, however, in their infinite wisdom, after agreeing to the part dealership funding, changed their mind at the 11 hour. (The rumour is that this was under direct instruction from Lord Mandelson, but like all good rumours there is nothing to substantiate this) This of course changed nothing other than further modifications to finance and direct discounting.

The article is correct, finance costs have increased as a direct result of the implementation of this program, however, the Q1 cost increases have slightly blurred all of this. Many vehicles are more expensive than 3 months ago, but this is generally a function in the changes in exchange rates and would have happened anyway.

And don't dismiss the popularity of the program, whilst many people on here doubt the 10 year old car driver trading in for a brand new vehicle, it is proving to be very popular. I can't share the figures yet, as soon as i can i will.

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Government money - scheme - private individuals money - kickback to Mp's.

Hmm maybe, which MP, the one that approved the scheme, GB? What sort of kick back, directorship after leaving parliament?

Personaly I think its more likely that this shower of turds we are compelled to call a government couldnt organise a blow job in a brothel and were more interested in saving face and "doing something" than what ever supposed effect this was meant to have on the car industry.

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So, all in all the only people to benefit from the scrappage scheme are those who normally drive a car of more than 10 years old AND who have the cash to buy outright? I guess the early success of scrappage will fade pretty quickly if this starts to be seen as a con.

Nope. If you pay cash, you insist on a discount up-front in place of the discount embedded in below-market-rate finance.

Asking prices are even more of a fiction than with property: the dealer wants to sell, and unlike selling a house, the sale of a consumer item to you doesn't prejudice their sale of another to someone else.

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So if you can pay cash up front for a new car you've potentially got yourself a good deal. But if not, it's no good to you.

Good to see Labour sticking up for middle and lower-income 'hard working families'...

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LOL - a gavin greenway OTT hate-site.

Yes, but tell us how you really feel.

Two,or possibly three,different things are being confused here.Firstly the government grand is being contributed directly to the buyer.Secondly the inflated interest rates being charged. we all know money is cheap.I am paying 3% on an overdraft so it can't realistically be costing as much as that to finance.

Either the supplying dealer is getting the money at 3% and charging 7%.If this is the case it will be a nice little earner as if the customer borrows £5k over 4 years there will be another £800 profit in it.Plus there are likely to be "Documentation fees" of up to £300,so the dealer/manufacturers contribution will be nicely covered.If the manufacturer is supplying the finance the profit will be bigger because he is most like only paying 2% at most.

I am hearing stories that defy belief.Last week my local Toyota dealer took in a T reg Renault Clio with just 16,000 miles on the clock.This car would make £1500 at auction.And it's going to the yard,criminal,and very very ungreen.

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The govt. recoup the money via the VAT.

It's a debt/sales numbers ramp. Green shooots!!!!!

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