- IMDA board member Brett Whiles explains why, as a scrappage scheme becomes more likely, the association will be lobbying to have used cars included
While the automotive industry struggles to get to grips with the biggest changes the industry has ever seen, the drums are banging for the reintroduction of a government scrappage scheme.
I can see the logic behind this, but with the majority of car manufacturers not being UK based, the only businesses to benefit will be UK main dealers and potentially some UK suppliers of parts.
A scrappage scheme would also have a massive impact on residual values of late used cars, putting more pressure on dealers, but also, the already suffering rental fleets.
The last scrappage scheme only achieved a drop of 5.4 per cent in emissions. A figure that could easily be matched by also including used cars.
The last scheme in 2009, was launched with an initial budget of £300m with another £100m committed to it in early 2010. At the moment, it is estimated that the loss of VAT revenue from just independent used car dealers being shut is £1m per DAY!
That is without the cost of furlough, bounce back and CBILS loans, plus the cost of deferred VAT and business rates.
If used cars, let’s say Euro 5 and Euro 6 qualify, the benefits as I see it would be as follows.
They will benefit not only from the customers who have the funds to buy new, but by opening to used car customers the scheme would be even more popular as the entry price will be much lower. This will increase VAT revenues from the Margin Scheme and get staff back to work getting them off furlough.
Main dealers, independents, supermarkets will all benefit from the scheme as opposed to just main dealers on a new car scheme.
An increase in demand for used cars will knock back to the source of this stock. This will increase conversion rates and values achieved for vendors.
A used car scheme would mean a scheme for everyone instead of just those with the budget for a brand-new car. By widening the appeal of the scheme, used car values will increase, meaning a better proposition for customers to part exchange against a more efficient vehicle.
5. Finance Companies
Every finance company has taken a massive drop in revenue with no new business being written and payment holidays becoming commonplace. This would give all finance companies, not just the manufacturers, a chance to write new business in volume to bolster the losses they are experiencing.
While it is a romantic idea to think everyone is going to buy alternative fuel vehicles, we are just not in the right place to make this feasible. If we could take some of the older cars off the road and replace them with Euro 5 and 6 technology the emissions gain is likely to be more than the 5.4 per cent achieved last time.
Additionally, if the market for Euro 5 and 6 is buoyant, this will mean better part exchange prices for customers that are buying new vehicles, naturally stimulating the new car market without the need for additional government subsidies.
7. Supply chain
Of course, there is also the supply chain to think about and all the jobs that would be saved.
I believe the government has got a real chance here to help businesses of all sales, not just the select few.
The amazing support they have shown smaller businesses through CBILS, bounce back loans and furlough would be counteracted by aiming scrappage at just new vehicles, seriously impacting the value and desirability of late used stock.
It would be in everyone’s interest to make this an all-inclusive scheme and would benefit everyone across the trade, not just main dealers or foreign manufacturers.
We, The IMDA, will be lobbying the government for used car scrappage scheme to ensure that the motor trade is supported so that there no more casualties.