The CEO of the UK’s largest dealership
group has said that the scrappage scheme, which will offer
carbuyers a £2,000 discount on a new car or light van if they scrap
a vehicle over 10 years old, could put an end to zero percent
finance deals in showrooms.

Trevor Finn of Pendragon commented:
“Discounts are masked and disguised – zero percent finance is a
form of discount.

“As a consumer you have to look at the
bundle of offers available.

“Will you be able to get zero percent
and a £2,000 discount together? It is not completely thought
through. Car makers are already discounting products.

“Where are they going to find an
incremental £1,000?”

However, it seems that some captives
and finance houses are rising to the challenge, and keeping
low-cost finance deals available to customers.

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By GlobalData

Santander Consumer Finance, which
provides finance for buyers of the Mazda range, has kept in place a
number of zero percent deals available on the Mazda 2 and Mazda 3
models, for example.

Mazda UK sales and marketing director
Mark Cameron said: “Our decision to offer a range of low finance
deals, including zero percent offers on models that are expected to
attract most scrappage scheme interest, brings a new Mazda into
range for an increasing number of motorists.”

Scheme will have ‘no impact’ on
subprime customers

The government’s plan to will
have very little impact on subprime customers, said ACF Car Finance
Ltd.

The lender insisted that the incentive
will largely pass subprime customers by, as “the availability of
suitable finance to purchase a brand new car is unlikely to
change”.

ACF sales and marketing director
Norman Beaumont added: “The majority of subprime customers would
not necessarily qualify; they tend to be in the market for cars
which are three to five years’ old, mainly due to the fact that the
majority of subprime lenders don’t extend finance to cover older
vehicles.

“And in most cases, a customer who
drives a car older than 10 years is not in a situation to have the
access to the funding required to buy a new car, so again would not
be able to take advantage of the incentive.”

Instead, it appears from early
indications that it is the elderly who have embraced the scrappage
plan most enthusiastically thus far.

Finn of Pendragon said that anecdotal
evidence from dealers suggested that up to three-quarters of
enquiries about the scheme came from older customers.

However, this demographic group may be
more inclined to pay for a car with cash from savings than to take
out finance, especially given the current low rates of interest
available to savers.

For more on the scrappage
scheme, see
Varying response on finance terms

Scrappage scheme
details

• The scheme will operate until
March 2010, or until the £300 million set aside to pay for it runs
out. Customers will receive a discount of £2,000 on new cars and
vans bought when a 10-year-old model is scrapped.

• The model being scrapped must
have an up-to-date MOT, and registered to its current keeper for at
least a year. Vehicles to which a SORN has been applied are not
eligible.

• The government will provide
half of the incentive, or £1,000, with participating manufacturers
providing the rest.

• VAT is to be applied before the
scrappage discount is taken into consideration, which some have
warned will dilute the scheme’s impact, reducing the government’s
nominal £1,000 contribution per car to £870, thanks to the VAT it
will rake back.