The Government has announced £100m in additional funding for the vehicle scrappage scheme (a.k.a. 'cash for bangers scheme' or 'vehicle discount scheme'). The initial budget for the scheme was £300m, which was intended to cover up to 300,000 vehicles. The increased budget of £400m will cover 400,000 vehicles.
Alongside the increased funding, the scheme has been extended to van owners with vehicles registered on or before 28 February 2002, and car owners with vehicles registered on or before 29 February 2000. Initially, the scheme only covered vehicles registered on or before 31 August 1999.
About the scheme
Subject to certain terms and conditions (see Used Cars: 5 Things You Need To Know About The Scrappage Scheme), the scheme offers a £2,000 discount when you trade in your existing vehicle and buy a new one. The subsidy comprises £1,000 from the Government with matched funding from vehicle manufacturers (although many manufacturers are actually offering more than this). The scheme will end on 28 February 2010 or when the £400m funding runs out, whichever comes first.
The scheme began in May and so far 227,750 orders have been placed. According to the Society of Motor Manufacturers and Traders, there were 67,006 new cars registered last month, which represents a 6% increase on last year, and just over a quarter of them were bought through the scrappage scheme.
Paul Everitt, SMMT chief executive, said: "The scrappage scheme is proving hugely popular with motorists and has provided an important boost to the UK motor industry. The scheme is clearly delivering environmental and safety benefits, in addition to incremental business for UK manufacturing and much needed demand for retailers."
The National Franchised Dealers Association also claims the Government earns back more in VAT than it pays out in subsidy for most scrappage sales, so the scheme is essentially self-funding.
In announcing the £100m additional funding, Business Secretary Peter Mandelson said: "We must make sure that the help we do offer is targeted, limited and proportionate. This is not a blank cheque to the auto manufacturers but recognition that there is still a short term challenge to boost demand and confidence in the sector."