UK: Scrappage deals offer profit opportunity
Consumers taking advantage of the UK's old-for-new scrappage scheme could make a profit of up to GBP1,100 (US$1,800) if they choose the right new car, according to Glass's, publisher of the dealers' price handbook Glass's Guide.
Popular 'scrappage incentive' cars such as the new Ford Fiesta, Fiat 500 and Citroen C1, which are scarce on the 'nearly new' used car market here were highlighted by Glass's.
The UK scrappage scheme gives consumers a GBP2,000 discount - funded half by the government and half by automakers - when they scrap a a car older than 10 years and buy a new one.
"The potential profit is greatest for those cars where the 'nearly new' value is currently high in relation to the list prices; notably small, affordable cars with low running costs," said Glass's managing editor Adrian Rushmore.
"Extended new car delivery times are supporting these windfall profits, because prospective buyers not eligible for the scheme are more likely to gravitate towards second-hand examples - indirectly boosting residual values - rather than suffering the wait for a new model.
"We expect that some franchised dealers will be pleased to secure unused examples of these popular, newly-registered cars, despite the inflated prices, because their demonstrator stocks have been depleted over recent months. It is likely they would find a buyer quickly and still clear an acceptable profit."
Rushmore said the UK scrappage scheme brought significant benefits for all consumers buying new cars under the scheme [some critics have suggested it should be extended to nearly-new models up to a year old - ed], including the vast majority who are expected to retain, rather than sell, their new car.
"Customers that choose to keep their purchases can be reassured by the fact that they will have minimised the effects of depreciation during their period of ownership. It is well within the realms of possibility that these customers will experience zero depreciation over the first 18 months," he added.
"The highly publicised scrappage scheme is having a 'halo effect' that benefits much of the used car market," Rushmore said. "The vast majority of car buyers entering the market will continue to be trading up from a car that is under 10 years old, and therefore not eligible for the GBP2,000 scrappage bonus. This means that used car prices will be unaffected.
"Our only negative observation concerns the availability of many small cars. Some were in short supply before the scheme was announced, and it is possible that certain models simply won't be available within the scheme's stipulated 16-week timeframe for delivery.
"This situation will be aggravated if manufacturers limit supply to the UK because of the low value of sterling against the euro, recognising that it may be more profitable for them to support scrappage schemes elsewhere in Europe."