The government’s scrappage bonus
scheme has had a varying impact on finance promotions around the
new car market. Some manufacturers are running attractive finance
deals on the back of it. Yet it is not always clear whether cash
buyers can achieve comparable savings.
Some confusion resulted from the late finalisation
of the scheme, and the government’s decision that its own subsidy
of £1,000 must be matched by a similar contribution from dealers or
manufacturers. The resulting £2,000 scrap bonus for the customer
raises some questions, given the opaque relationships between list
price and real average selling prices.
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The scheme starts for new vehicles supplied from 18
May. It will end on 28 February next year, or sooner if the £300
million budgeted for state subsidy is exhausted. Small vans are
eligible as well as cars. The vehicle to be scrapped must be at
least 10 years old with current MOT, and registered for at least 12
months to the buyer of the new vehicle.
The scheme was announced in the April Budget
statement, and it was only at the beginning of May that some
features were clarified by the Department of Business Enterprise
& Regulatory Reform (BERR). Key conditions are that the minimum
£2,000 price discount must be offered across the whole of a
dealer’s model range, and in addition to any other promotional
benefits.
The scheme conditions are not being enacted in
statute law. They will be contained in standard contract documents
between BERR and the dealers.
Sue Robinson, director of the RMI’s National
Franchised Dealers Association, commented: “We would have preferred
a wholly state-funded scheme as in Germany, but we are confident
that the UK scheme will boost sales. A point to watch is that the
required inclusion of whole ranges will lead to high sales in
certain segments, and possible delivery delays.”
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By GlobalDataThe burden of compliance with the BERR scheme rests
initially on dealers, but manufacturers and finance companies are
very much affected. Virtually all current advertising of both
pricing and finance for new cars is placed by manufacturers,
committing dealers across their franchises.
Wide participation
As of 12 May, all but one of the big
volume manufacturers for the UK market had decided to take up the
BERR scheme. Honda was still considering it.
As well as taking up the BERR scheme for eligible
scrap cars, Nissan will be offering unsubsidised £2,000 price
discounts to those scrapping cars in the 8 to 10-year old range,
but only when they buy new cars made in the UK. Due to EU and World
Trade Organisation rules, the state subsidy cannot itself
discriminate against imports.
Fiat is not currently promoting finance deals in
its campaigns. Vauxhall, Peugeot-Citroën, Nissan, BMW and
Volkswagen are all doing so, but as of 12 May had not reflected
scrap bonus illustrations in their advertised finance terms.
Ford was promoting a two-year PCP deal at 3.9
percent APR on its Ka model, but this was stated to be “not
available in conjunction with the scrappage scheme”. The same web
advert offered the £2,000 scrappage discount on the Ka with no
mention of finance – and larger discounts higher up the model
range, for example £5,000 off the Galaxy Edge list price.
On the other hand Volvo, which is also in the Ford
group, is promoting a “dealer deposit contribution” of over £2,000
on top of the £2,000 scrap bonus on a three-year PCP deal for
its
C 30 model. Even with a 9.5 percent APR, the total payable
including the balloon payment comes to £14,287, well below the
£15,745 list price. A group representative made it clear to
Motor Finance, however, that price discounts equivalent to
the deposit contribution are equally available to cash buyers.
Renault illustrates a similar finance offer on its
Clio 2009 Extreme 1.2 model, where the total payable over three
years comes to around £8,000, against a list price of around
£10,000, with a £3,000 price discount and APR at 10.8 percent.
Renault’s advert itself makes it clear that price discounts above
the BERR minimum are available on selected models with or without
finance.
BMW is advertising a dealer deposit contribution of
£2,260 within 40-month PCP terms on its 116i Sport model. This is
advertised irrespective of scrappage scheme eligibility, and
without reference to the cash purchase alternative. A BMW
representative explained that the price will be discounted by a
further £1,000 on scrappage scheme transactions.
Toyota is advertising 8.9 percent APR terms on PCP
deals for selected models in its Yaris and Auris ranges, “only in
conjunction with the scrappage allowance”. The ad specifies: “The
scrappage incentive allowance and finance offer cannot be used in
conjunction with any other offers.”
One or two of the adverts seem to raise compliance
issues under the terms of the BERR scrappage scheme, and
conceivably under the Consumer Credit Act (CCA). The CCA aspect is
complicated by the fact that in PCP and other HP agreements, title
to the car passes through the finance company rather than direct
from dealer to customer.
Credit law specialist Dennis Rosenthal of Berwin
Leighton Paisner commented: “Where a finance offer is said to be
unavailable under alternative promotions, a question could be
raised as to whether the cash price, and hence the APR and other
terms, will be documented correctly.
“The Advertising and Agreements Regulations made
under the CCA both refer to the comparative price payable on cash
sales. However, it can well be argued that a dealer deposit
contribution is a payment towards the cash price and not a discount
from the cash price. On balance I feel that such advertisements
comply with the CCA, whether or not they comply with the scrappage
scheme rules.”
