5:45 pm, June 16, 2009
So we have a cash-for-scrap scheme courtesy of Mr Darling’s latest budget – a bid, in the words of government, to assist the motor industry and help it through a difficult time.
How very honourable – but I’m sure anyone working in the car trade, be it new, used or trade-to-trade, such as an auction house, will be feeling more than a little perplexed not least at the Chancellor’s economy with the truth during his budget, but also at the potential ramifications this will have on the car market as a whole.
Excuse me for being serious this month – as I’m sure you’ve worked out by now, I like to raise a titter or two where I can – but this ‘incentive’ has to be one of the most ill-conceived government quangos ever.
First, there’s the mere fact that the announced £2,000 incentive for a punter to scrap their 10-plus-year-old car and buy a new one isn’t £2,000 at all, but £1,000 from the government plus a further £1,000 from the participating manufacturer if they wish to take advantage of the system.
Pardon me, but last time I looked the world of car manufacturing was in turmoil. Some of the biggest car companies in the world were teetering on the brink, the less aggressive franchised dealerships were struggling to pay the bills and even a couple of big dealer groups had fallen by the wayside.
This doesn’t happen to companies if they have enough spare cash to knock a grand off for every customer that comes their way, so am I being unreasonable to suggest that a government-sponsored erosion of profit margin is about as much use right now as offering first-time buyers a tenner off a new home? I don’t think I am.
What’s even more frustrating is that once you’ve allowed a grand for someone’s ‘scrap’, you have to weigh it in and get it destroyed. So in effect you give a grand’s part-ex for a car you’re not allowed to then sell on, even if you could potentially get your grand back.
Call me old-fashioned, but the way this trade works is that every part-ex has a stand-in value, which is what the salesman who clinches the deal realistically thinks he can get back if he puts the car through the block, or if a little braver resells it himself.
MORTGAGES TO PAY
Car dealers, on the whole, are not in the business of giving away money, for despite being unfairly categorised in the same popularity league as traffic wardens and estate agents, the vast majority of us have mortgages to pay, kids to support and food to put in the fridge. Fact of life, simple as.
The scheme will also upset the whole balance of the used car industry, as supply of good older cars will more or less dry up overnight, pushing the prices of those 10-plus-year-old decent cars (of which there are several on the road, as the average age of a scrapped car is about 14 years), while the cheaper end of the market will be bogged down with rubbish.
Think about it – well-heeled owners of old cars can scrap their cherished and well maintained one for a bursary, those who drive all their life in smokey old bangers would never even get the chance, so while all the pristine C-Class Mercs and doctor-owned Volvos that keep the likes of me in business will disappear into a cloud of ferrous oxide, nasty old Escorts and rust-riddled Fiestas will prevail, unaffected by the scrap incentive.
Meanwhile, wealthier punters are being given a free handout if they want a new car, with which they are entitled to go and shaft a new car dealer.
That leaves the new guys missing out on valuable profit, while also nicking customers from used forecourts and throwing the resale values of late model second-hand cars into disarray, which means none of us have anything to cheer about.
Apart from, maybe, my old mate Billy Two Bags (a stalwart of this column), who for once has got the value of his entire stock about right – and he’s owned most of them for well over a year so could potentially chop in the lot!
