June 19, 2009

The Scrappage backlash is well and truly under way. The supposed environmental benefits of swapping older motors for newer more efficient ones have been comprehensively debunked. The jobs supposedly created are often overseas. While dealers (those that have opted in) are supposedly recouping their half share of the £2000 sweetener by cutting back on cut-price finance deals.

Two thousand pounds off often seems to mean 2k off the full list price, which no-one pays anyway. For all but the smallest cars, online brokers are already offering more than £2k off most models.

The latest flaw found in the scrappage scheme (which saw 60,000 10-year plus vehicles traded in during its first month) is that scappagers are seeing the savings they made subsumed by increasing insurance costs.

Not only do they face higher premiums on their nice new cars, reports myfinances.co.uk, but the costs involved in switching are also taking their toll.

The story looks a little in danger of falling flat, however, with the revelation that (according to data from uSwitch.com) average adjustment fees for a car insurance policy are just £19.40, with the highest fee (£25) charged by AA, Esure, More Than, and Sheila’s Wheels. The average cancellation fee was put at £41.67. But even that is a relatively small chunk out of £2k.

A bigger problem for the scrappagers could be depreciation. Myfinances.co.uk claims “motorists buying the UK’s top ten best-selling new cars are set to lose £527 each month due to depreciation in the first year behind the wheel of their brand new motor.” Now that would take care of £2000 fairly quickly!

The UK’s best-selling car‚ the Ford Focus Style ‚ the article continues, loses £8,625 or 51 per cent of its value in the first year, while the Vauxhall Astra loses 67 per cent of its value. Depreciation hits hard in the event of a write-off‚ as the insurance payout only covers the vehicle’s value at the time of the accident.


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