A £2,500 Handout To Scrap Your Old Car

Posted on: 14 April 2009 by Gareth Hargreaves

Motorists are to be offered up to £2,500 in taxpayer-funded handouts for trading their old car in for a newer model.

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Ministers are backing the idea of a 'cash-for-scrap' bounty under plans to kickstart the motor industry.

A scheme pioneered in Germany has led to a 21% rise in new vehicle sales in February. By contrast, the number sold here fell by more than 21% last month, the tenth monthly drop in a row.

Sources at the Department for Business and Enterprise said ministers have had a change of heart after initially being sceptical about the idea.

In January, the German government began offering buyers of new cars a £2,500 cash incentive to trade in a vehicle more than nine years old.

Carmakers have been lobbying for months for the UK to follow suit and suggested £2,000. A figure has yet to be agreed, but the Government has been told it must be enough to tempt motorists in to showrooms.

A scheme in France, where buyers get around £1,000 for cars over ten years old, has been nowhere near as successful as in Germany, where Ford dealers reported customers 'coming through the doors in flocks'.

Whitehall sources said last night that this was a 'convincing argument' to introduce a similar payout. One said, "We're not yet in a position to make an official announcement. But the mood music is very positive. There has been a change of heart."

Paul Everitt, chief executive of the Society of Motor Manufactures and Traders, which has been lobbying ministers for help, says, "The scheme would allow both cars and light commercial vehicles (vans) over nine years old to be scrapped in return for a £2,000 cash incentive towards a new or nearly new vehicle.

"Similar schemes adopted in Germany, France and Italy have proved successful, significantly boosting the market and reducing CO2 emissions by taking some of the older vehicles off the road."

Retail Motor Industry Federation chairman Paul Williams, who has discussed the plan with Treasury minister Angela Eagle, says, "The introduction of a scrappage scheme for nine-year-old vehicles could create a demand for up to 250,000 new vehicles whilst at the same time remove an equal number of old and more heavily polluting vehicles from our roads for ever".

The fillip for car-makers comes as Lord Mandelson will today come under further pressure to agree to a bailout for the beleaguered car industry when he holds talks with leading UK manufacturers.

The meeting will coincide with an announcement from Toyota that it will slash production and working hours at its British HQ in a bid to avoid lay-offs and shutdowns.

The Business Secretary has invited manufacturers - including ailing Jaguar Land Rover, Vauxhall, Ford, Honda, Bentley and Toyota - to visit his London headquarters at the Department for Business and Enterprise.

Carmakers will be told that they will be given access to up to £2.3bn worth of Bank of England loans, including £1bn from the European Investment Bank. However, they will be seeking much more money from the Government as the industry faces the worst crisis in its history.

What do you think of the proposed scheme? Could it work?

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