Wednesday 29 March 2017

Wheel and deal: car scrappage scheme is worth checking out

The Government's scrappage scheme is worth checking out if you have a car that is more than 10 years old, but the finance for a new vehicle might be hard to come by, writes John Cradden

IF YOU have an old banger, putting it towards a new set of wheels by availing of the Government's car scrappage scheme might seem like a no-brainer -- if you have the cash to spare.

To qualify for the scheme, which gives you €1,500 off the Vehicle Registration Tax (VRT) portion of a new car price, you must have a car aged 10 years or over that has been registered in your name for at least 18 months at the time of scrapping it.

It must also have a valid NCT, and be insured for at least 12 months.

Your new car must be one that has a low enough Co2 emissions rating to qualify for road-tax bands A (up to 120g/km) or B (120 to 140g/km), which generally means a diesel or a small petrol-engined car.

The scheme will run until the end of this year.

Although €1,500 might not seem like much of a discount, many dealers hoping to take advantage of the interest generated by the scheme have been offering some attractive extra top-up discounts of their own on qualifying models.

Renault, for instance, currently offers a "double scrappage" discount of €3,500 on a new Renault Megane 1.5dci five-door diesel hatchback.

This includes a Renault "trade-in" allowance of €1,500, a further Renault €1,500 scrappage allowance as well as the €1,500 government incentive, so you end up paying just under €14,800 rather than the list price of €20,300 -- a total saving of €5,500.

"With the majority of manufacturers adding special discount offers to the VRT refund of up to €1,500, there is fantastic value to be had through the scrappage scheme," says Alan Nolan, chief executive of the Society of the Motor Industry (SIMI). "It really is an opportunity to own a new car at a great price."

In addition, many manufacturers cut Irish prices on many models late last year, well before the Government announced the scheme.

However, a big sticking problem for many is that car finance, like any other type of personal loan, is difficult to come by.

"Unfortunately, the finance element is still a problem, with rejections remaining high," says Shane Teskey, chief executive of car history checking website Motorcheck.ie.

But if the cash or finance is not a problem and you satisfy the terms and conditions of the scheme, there are obvious upsides to driving a new car, not least the feel-good factor.

If you are buying a smaller or more fuel-efficient car, the chances are, that you will save money straight away on the costs on petrol, tax and insurance. Car safety is also improving all the time, too.

You also won't need to worry about the NCT for at least four years, while new cars often come with free or discounted servicing packages for the first two or three years, along with longer manufacturer warranties.

"A new band A or B vehicle will have a lower running and maintenance costs than your current 10-year-old vehicle," says Mr Teskey.

On the other hand, there remain a number of equally- strong financial arguments against buying a new car at all at this time.

The most obvious one is that all new cars typically suffer a very sharp depreciation in their values over the first two or three years of their lives.

For example, an analysis last year of "whole-of-life" costs of new cars by car-fleet providers Merrion showed that a Mini Cooper 1.6 diesel, a very sought-after car that would have cost over €25,000 new in August 2009, would be worth just over €10,000 after three years.

Like other manufacturers, BMW has since slashed the retail prices of Minis and other models.

"Large discounts bolstered by the scrappage scheme will also mean a steeper depreciation curve for many cars during the first year," says Mr Teskey.

"If your motivation is to change the car after one or two years, the numbers may not stack up, but after four or five years the depreciation should level out and any negative equity should be neutralised."

But does it make sense to scrap your 10-year-old car if is if it worth more than €1,500?

Teskey says dealers are keen to take advantage of the publicity generated by the scheme to draw attention to the many non-scrappage deals on offer. "It may be worth your while selling it and presenting yourself as a cash buyer to avail of a larger discount," he says.

There have already been reports from the motor trade of many cars in excellent condition and with low mileages being needlessly scrapped just because they are over 10 years old. If you are not sure what your old car is worth, you can get it valued quickly using online services such as Whatcar.ie, Autocheck.ie and Motorcheck.ie.

Irish Independent

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