Used Car Scrappage

The whole UK new and used car market must benefit from a Government-funded scrappage scheme, according to ACFO (Association of Car Fleet Operators).

Consequently, the leading fleet decision-makers’ organisation says a scrappage scheme should incentivise the purchase of vehicles up to four-years-old powered by engines that meet Euro4 emission standards and have a CO2 figure of 165 g/km or less.

ACFO says that applying a scrappage scheme to such ‘qualifying clean and safer cars’ will boost a much greater proportion of the UK car market and will provide a ripple effect across used vehicle residual values as demand rises.

As a result of the subsequent increase in used vehicle values, the balance sheets of outright purchase fleets and contract hire and leasing companies will improve and that will make it easier for them to obtain credit to further stimulate the UK car market with the purchase of new vehicles.

ACFO made its views known at a ‘scrappage petition meeting’ held at the London headquarters of the Society of Motor Manufacturers and Traders on Friday (April 3).

ACFO chairman Julie Jenner, who represented the organisation at the meeting, said: “ACFO is broadly supportive of a scrappage scheme. However, the current focus of any UK programme seems to be around offering a financial incentive to drivers of vehicles at least nine-years-old and encouraging their replacement with either new or nearly-new models with the help of a Government handout perhaps worth around £2,000. There is also the possibility of so-called ‘match funding’ from vehicle manufacturers.

“But, the vast majority of these motorists drive older cars because they cannot afford to buy and run new or nearly-new models. Additionally, even with the benefit of a scrappage incentive they are unlikely to either have the cash or be able to obtain the credit to fund the outstanding amount on a new or nearly-new vehicle.”

Consequently, said Ms Jenner: “By including a greater proportion of the UK car parc within any newly introduced scrappage scheme, there is a greater likelihood that more people will trade-in their old polluting vehicle for a newer model that, in many cases will be an ex-company-owned vehicle.

“Such a move will kick-start new and used vehicle demand and fleets will, in many cases, be persuaded to return to the new car market as a result. Our proposal has the benefit of stimulating vehicle demand across the entire vehicle-buying sector.”

ACFO believes that drivers of older cars are far more likely to be able to buy a four-year-old Ford Focus 1.4 Studio five-door with an April 2009 CAP ‘average’ price of £2,875, a 2005 Vauxhall Vectra 1.9 CDTi LS 120 hatchback with a CAP ‘average’ price of £3,000 or a similarly aged and priced Nissan Micra 1.2 SX five-door than a £7,000 new or nearly-new model as suggested under the motor industry’s scrappage plan.

ACFO also believes that any scrappage scheme - and it is rumoured that the Government may include an announcement in the April 22 Budget – must apply for a predetermined timeframe.

“We suggest that a scrappage scheme should be in place for a minimum of 18 months. We do not want a scheme launched that is limited by a cash amount or for a short period of time as that is likely to create an instant demand peak with no long-term benefits,” said Ms Jenner.

ACFO has also suggested that a Government-backed scrappage scheme could be launched linked to a sliding scale of incentive payments related to vehicle age. For example: £2,000 for a new vehicle; £1,500 on a 12-months-old model; £1,200 on a two-year-old model; £900 on a three-year-old model and £500 on a four-year-old vehicle.

ACFO’s proposal is not unlike a new ‘trade-in incentive scheme’ launched this month by Citroen. The motor manufacturer is paying £2,000 to customers who buy a new vehicle in place of a vehicle registered before 2000 and £1,000 to customers who replace a vehicle registered between January 1, 2000 and December 31, 2002.

Ms Jenner concluded: “Our scrappage scheme proposals promote the replacement of older cars with cleaner, safer and better equipped newer ones, but will benefit a greater proportion of the UK car market - consumers, fleets, franchise dealers, used car dealers and motor manufacturers.”

Key points of ACFO’s scrappage scheme proposals:

• Applies to new and used cars up to four-years-old
• Used vehicles must be Euro4 compliant with CO2 emissions below 165 g/km linking them to a current Vehicle Excise Duty threshold for administrative ease
• A sliding scale of payments linked to the age of the vehicle being purchased
• In place for a pre-determined period of time, for example 18 months