July 29th, 2009

Although the car scrappage idea was good initially, new car buyers that are part of the scheme are loosing out on the low price deals that everyone else is getting.

The new scrappage scheme is where the government gives you a £2,000 grant towards a brand new car if you scrap a car that’s 10 or more years old.

Not all car buyers will lose out on the deals. Only people that choose to pay for the car over several years using a car manufacturers loan. The way they will be loosing out is because the manufacturers who offer these loans that have interest rates as low at 4.0%, they are charging customers on the scrappage scheme up to 10% APR. This means that it’s better to sell your car seperately and get a lower APR.

Toyota is just one of the many manufacturers who are increasing the percentage rates on their loans for their customers that are part of the scrappage scheme. Toyota offer loan deals with percentage rates between 3.9 and 5.9%, due down to the length of the loan. However, they are now only offering a 8.9% rate to custoners that are taking part in the car scrappage scheme. This means that is you were to buy a T2 Avensis, with the scrappage scheme it would set you back £14,565, however, once you pay off the loan you would have payed just over £17,200 which is almost £700 over the retail price.

Ford and Seat are yet another 2 manufacturers that are doing this to their new car buyers. When purchasing a Ford, they normally offer a 3.9 APR, but if you are buying your car as part of the scheme, you have to settle with the 7.9 APR that they have to offer. Seat seems to be the worst of them all, they normally offer loans with a 0 APR, however, if you are part of the scrappage scheme they will force you to have an 8.9 APR.

This problem has occured because car manufacturers are being charged half the bill of the scheme, the other half is being picked up by the government. This has resulted in an increase in percentage rates to make sure that the car manufacturers don’t loose any money.

It sounds like it’s starting to make more sense to sell your old car privately and don’t take part in the governments scheme. However, there are a range of alternatives to buying a brand new car. Contract hire is a method of owning a car that is often overlooked. By taking out a Ford lease you can get the latest cars at cheaper prices.

So before you go out and scrap your car as part of the scrappage scheme, look into the other options that could save you some money.

 

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