Scrappage benefit 'lost in 88 days'

Are you thinking of taking advantage of the governments scrappage scheme? If so you might want to think again.

For years people have discussed the depreciation on new cars; we have all heard people say 'it loses value as soon as you drive it off the forecourt'. Now a report from uSwitch states the depreciation kicks in after 88 days.

The scrappage scheme begins on Monday, allowing owners of 10 year old or more cars to trade in old for new and receive £2000.

The research by uSwitch , vehicle depreciation is set to be the "thorn in the side" of the scrappage scheme. The initial £2,000 incentive is wiped out in depreciation in just 88 days of owning the new car.

In total, new vehicles purchased under the Government's car scrappage scheme are set to lose £12.5 billion in depreciation after just one year, it said. Purchasing one of the top 10 most popular new cars costs £16,232 on average and this value plummets by 49% in the first year alone, while the UK's best-selling car - the Ford Focus Style - loses £8,635 or 51% of its value in the first year.

Mark Monteiro, of uSwitch, said: "When choosing a new vehicle, motorists should ensure they research the rate of depreciation of their desired new car, as research highlights how some of the top 10 most-popular vehicles hold their value far better than others. Any motorists tempted to take advantage of the scheme should research the cost of insuring their desired new vehicle as a matter of priority, as the cost could be significantly higher than they are currently paying for their old banger.

"All drivers who are planning to switch their old cars for a newer model need to be prepared for a hike to their premiums of up to 30%."

Scrappage Scheme - What are your views?

The discussions over the possibility of a scrappage scheme being introduced by the UK government intensified over the Easter weekend.

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Any old iron?

A scrappage scheme for cars has been running in Germany for a number of months, and has reportedly delivered 577,000+ sales. A similar scheme has also been running in France, although the incentive was not as high. Westminster gossip says that Mr Darling is looking into a scrap scheme for the UK, and this will most likely be announced on April 22nd 2009 - Budget Day.

So what would such a scheme mean to you and I? The model in Germany offers €2,500 to customers who trade in their 10 year old cars for newer fuel efficient cars. (brand new or a year old). The UK scheme will probably offer £2000 to any car buyer trading in a 10 year old car. £2000 which can then be used against the purchase of a new or nearly new car.

A quick look around the carmony.co.uk site and I find a good list of cars which would qualify for the scheme and would look even more attractive with a discount of £2000.

Golf Special Edition Hatchbacks starting at £16,490

Peugeot 307's from £7,495

And you could trade against a Ford Focus for just under £12,000. Saving £2000 on this car would mean a saving of over 16%

So would this be a big enough incentive for you and if so which car would you get?