Even though the idea of the scrappage scheme was good, buyers that are using the grant are loosing out because car dealers are not offering the same low price deals that they offer to anyone else.
If you are unsure of what the scrappage scheme is, it’s where the government gives you a £2,000 grant to scrap your old car if it’s 10 years or older.
Not all new car buyers will be denied the cheap deal. Only new car buyers that take out a loan with the manufacturer to pay off the car over a number of years. Scrappage scheme participants will be loosing out because manufacturers who offer these loans that have inteerest rates as little as 4.0%, they are choosing to increase their rates up to 10% APR for participants of the scrappage scheme. This means that you can get a new car cheaper by selling your old car seperately and get a lower APR than go into the scrappage scheme.
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 has loan deals available with rates between.9 and 5.9%, based upon a series of factors, including the length of the loan and the size of the deposit. However, they are now only offering a 8.9% rate to participants of the scrappage scheme. This means that if you were to buy the new Toyota T2 Avensis, it would cost you £14,565 with the scheme, but once you pay off the loan, you will have payed an extra £2,699 which is almost £700 over the standard retail price.
Ford and Seat are another 2 manufacturers that are doing the same thing to scrappage scheme participants. Ford normally offer car buyers a 3.9 APR, but if you are buying a new car with a scrappage grant, you only get to choose from 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 come about because the government is making the manufacturers pay half of the bill rather than the government paying for the entire scheme. This has left many car manufacturers annoyed because they have to find the cash from somewhere else, which they apparently now have.
So it sounds like it would be better to sell your car privately rather than going into the scrappage scheme. However, there are different options out there. 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 sign up for the scrappage scheme, consider other options to save yourself money.
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