Scrappage scheme extended to fund 100,000 more cars

September 30, 2009 | By | In Statistics

Business Secretary Peter Mandelson promises more Govt money for new car discounts.

Just as the new cars cash-for-scrap scheme came within days of running out of funds – the Government has stepped in to provide funds for 100,000 new cars.

Business Secretary Peter Mandelson had previously said that he would not add to the £300m the Govt put into the scheme at its launch in May. But in a surprise change of heart he announced this week that he would keep the scheme going.

At launch, the plan was that the scheme would run until next February, but end earlier if the cash set aside for the scheme was used up. The government contributes £1000 to each new car sale where the owner part-exchanges a vehicle that is at least 10 years old and the car maker puts in a similar amount, giving the buyer at least a £2000 discount.

Demand for the scheme has been such that some 250,000 cars have been purchased using it. And, because the £300m had to cover the cost of administration as well as the discounts, the scheme, it is predicted could have run out of cash this week.

The Society of Motor Manufacturers and Traders and other dealer and motoring groups lobbied hard for an extension to the scheme, to allow it to continue until February but it looked for a while as if the government would not budge.

So this week’s announcement was unexpected, but welcome. Loo0ked at one way, the scheme is self-financing because the government ‘earns’ over £1000 in VAT on every car costing over £7600, plus whatever road tax is payable.

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