Scrappage Scheme Will End Soon as Treasury Profits

It has been revealed that the UK Government’s Scrappage Scheme will earn over £100 million for Alistair Darling’s Treasury, but that the scheme will not continue once current funding runs out – expected to be in October at current run rates.

The 15% VAT charged on all new cars costing more than £7600 more than makes up for the £300 million spent on the scheme, and the average price of new cars in the scheme has actually been £9000.

The news follows the announcement that the first loan guaranteed under the scrappage scheme has been secured by Jaguar Land Rover owners Tata, with £10 million going towards development and manufacture of Tata cars in the UK. This is despite breakdowns in negotiations with Lord Mandelson that led to the Jaguar Land Rover members pulling out and securing their own funding.  Tata are now “considering locations” for a factory in Britain which could provide hundreds of jobs. The Government is apparently figuring out how to invest £2 billion with a number of other companies.

The Society of Motor Manufacturers and Traders (SMMT) recently called on the Treasury to extend the scheme past the original end date of February to avoid an abrupt decline in new car sales, particularly when the higher rate of VAT is introduced around the same time, but the Government wants to balance the needs of other parts of the car industry – the second hand market and service and repair garages.

Of course, you can avoid the risks of car buying completely by leasing your next new vehicle.