Earlier this year SMMT made a formal proposal for a scrappage incentive scheme to help kick-start the car market. As part of the 2009 Budget, government announced plans for a UK scrappage incentive scheme. The scheme will see government offer a £1,000 incentive to be matched by participating vehicle manufacturers when scrapping a taxed, insured and MOT'd vehicle over ten years old which they have owned for at least one year and buying a new vehicle. Government has a fixed budget for the scheme of £300m which will be used to cover administration costs as well as its share of the incentive.

On 28 September 2009 government announced an extension to the scheme to allow 100,000 more vehicles to participate. The scheme will now cover up to 400,000 vehicles. Eligibility criteria will remain the same with the exception of the date of first UK registration which will be changed to 29 February 2000, or before, for cars and 28 February 2002, or before, for vans. These changes on scheme eligibility are now in effect. Consumers should check with their dealers that they have started implementing the new terms.

Commenting on the scheme, SMMT chief executive Paul Everitt said;
"The scrappage incentive scheme recognises the automotive industry and provides good value for money for the tax payer. The increased VAT revenue to government largely offsets the cost of the scheme, yet the positive impact it could have on building consumer confidence and boosting the new vehicle market is extremely valuable to the UK automotive sector and the 800,000 people that work within it. We are determined to maximise the success of this scheme."

Q&A

1. What are the basic details of the scheme?
Passenger cars or LCVs not exceeding 3.5 tonnes are eligible for the scheme. The vehicles must have been first registered in the United Kingdom on or before 29 February 2000 for cars and 28 February 2002 for vans and currently registered with DVLA to the person making the application. The applicant must have a UK address and must have been the registered keeper of the vehicle continuously for the preceding 12 calendar months before the order date of the new vehicle. The vehicle being offered for scrapping must have a current MOT test certificate or one no more than 14 days past the expiry date when placing the order.

2. What is the process for consumers who want to participate in the scheme?
Consumers will take their vehicle to the dealer to confirm eligibility and the dealer will take care of the rest. The dealer is responsible for all paperwork and for getting the vehicle scrapped in the right way.

3. What do I need to take with me to the dealer?
You will need to take a valid MOT certificate, V5C registration form and valid ID.

4. I have two vehicles that are eligible for the scheme. Can I get £4,000 towards my new vehicle?
No. You may purchase one new vehicle per one old vehicle under the scrappage scheme.

5. Is there a vehicle-per-household limit?
No, but the rule is one vehicle scrapped for each new purchase and the name on the old vehicle V5 registration must match the name on the new vehicle's V5.

6. What happens to my vehicle once it is scrapped?
The dealer will take your vehicle to an authorised treatment facility (ATF). In accordance with EU regulations, at least 85% of your old car will be recycled. More information may be found at www.autogreen.org and www.cartakeback.com.

7. How much does this scheme cost the taxpayer?
Government has capped the scheme at £400 million which includes admin fees. However, government will be able to off-set this cost against the increased VAT revenues received. The government stands to benefit from the scheme by almost £270 million, with VAT returns of over £530 million (based on an average new vehicle price of £9,000), plus savings from improvements in CO2 emissions, air quality standards and reduced accidents, will provide an estimated net benefit of £250 million.

8. I scrapped my vehicle before the scheme was announced and received a Certificate of Destruction (CoD). Can I take the CoD to the dealer and get the £2,000 incentive toward a new vehicle?
No. You must take your vehicle to the dealer for scrapping. A CoD is not sufficient to participate in the scheme.

9. I have an eligible vehicle and already placed an order before Budget 2009. Can I have the scheme applied?
No, only orders placed on or after 23 April are eligible for the incentive. (Vehicles ordered before 18 May can only go through the scheme if the old vehicle has not been scrapped, the new vehicle has not been delivered and all other eligibility criteria has or will be met).

10. I want to use the scheme but my vehicle is valued at more than £2,000. Can I trade my vehicle in and use the scheme?
If a motorist decides to trade in the vehicle under the scheme they will only get the discount if the car is scrapped. The majority of cars that are eligible to be scrapped are not likely to be worth more than the incentive.

11. Under this scheme, do I have to buy a new vehicle similar to my current one?
The scheme stipulates that each participating manufacturer must apply the scheme to its full range. And with each participating manufacturer, motorists may purchase a car or van. Evidence from other European countries shows that those taking advantage of the scrappage scheme tend to buy towards the less expensive end of the market, generally meaning smaller and more fuel efficient cars.

12. How long will the scheme run?
The scheme will run until the end of February 2010 or until the £400 million pot, which covers costs and incentives, has run out.

13. What will happen to the incentives and discounts vehicle manufacturers are currently offering?
Throughout discussions with government, vehicle manufacturers expressed their commitment to maintaining incentives and discounts already on the market. Several manufacturers have extended discounts and deals and will include the scrappage scheme as well. Motorists should check with individual manufacturers for full details.

14. I have heard that CO2 emissions from the production of a new car is far worse than from the operation of my current, older car. What kind of environmental impact will this have?
Only about 10% of a vehicle's CO2 emissions are derived from its production. This includes logistics and energy for sales and support functions. 5% of a typical vehicle's CO2 occurs when it is scrapped. And 85% of a vehicle's total CO2 emissions occur during the in-use phase. The automotive industry is committed to reducing its impact on climate change, with average CO2 emission from cars in the UK falling 17% in the last decade, despite an increase in the number of cars on the road. New cars are cleaner than ever before.

15. Is this the same as the electric vehicle incentive scheme?
No. To make ultra-low carbon vehicle solutions competitive for consumers, government has provided an incentive of £2,000-£5,000 for motorists to buy electric and plug-in hybrid cars.

Government is to begin discussions with the automotive and finance industries to see how the incentive can best be delivered. Eligible cars will have to meet safety standards and not exceed a maximum CO2 ceiling, to be announced on a future date. The scheme is likely to be operational in 2011.

16. I want to support British jobs. Will my purchase actually help British workers?
67% of vehicles sold in the UK are from manufacturers that also produce engines and vehicles here. In total more than 800,000 people are employed in the UK automotive sector, from supply chain through to sales, service and repair. By stimulating demand for new vehicles we will support all parts of the industry from design and development through to the retail sector.

Automotive is a global business and the UK benefits from global markets and support. European countries which have implemented a scrappage scheme include: Austria, France, Germany, Greece, Italy, Portugal, Romania, and Spain. The sector will benefit from a co-ordinated approach across Europe.

17. Isn't the scrappage scheme another part of the motor industry's bailout?
The motor industry has not received nor asked for a 'bailout'. Government has announced a package of loans and loan guarantees welcomed by industry but this is for medium and long-term investment in environmental research and development. The aim of the scheme is to kick-start the demand for new vehicles and get consumers buying again.

18. How does the scheme affect VAT?
The scheme is inclusive of VAT and should be reflected on your invoice:

Cost of new car: £10,000
VAT at 15%: £1,500
Sub-total £11,500
Scrappage subsidies: -£2,000
Total price to pay: £9,500.

19. Are all vehicle makers participating in the scheme?
Participation in the scheme is voluntary for manufacturers, dealers and motorists. See the following table.

All major vehicle manufacturers have indicated to SMMT that they are taking part in the scrappage scheme. This may change from the final list which will be announced by government. These have indicated they will take part:

* Includes Abarth, Alfa Romeo, Fiat

Scrappage incentive schemes currently operating across Europe:

(Source: ACEA)

If you would like more information on the UK auto industry, try www.motorindustryfacts.com.

Other useful links:
http://www.berr.gov.uk/whatwedo/sectors/automotive/index.html

http://www.direct.gov.uk/en/Motoring/BuyingAndSellingAVehicle/AdviceOnBuyingAndSellingAVehicle/DG_177693