Wednesday, April 22, 2009

CAP offers view on Scrappage scheme announcement

CAP believes the Scrappage scheme announced today will have a limited impact on both the new and used car markets.

• The bulk of new car demand stimulation will be for the cheapest small cars.
• Consumers currently running cars of 10 or more years old are likely to require significant finance over and above the £2,000 voucher.
• By definition they are likely to be sub-prime finance customers. This area of finance provision is subject to the greatest caution among providers. A proportion of those qualifying for the scheme may therefore still be unable to acquire the finance to purchase.
• In the case of light commercial vehicles CAP is sceptical that many tradespeople with 10+ year old vans will switch straight into a new vehicle, due to the same financial factors.
• Any nearly new car or van of the type for which most new car demand will be stimulated will see its value reduce.
• Residual value reductions will therefore be limited to later used examples of the cheapest small new cars and vans.