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- Scrappage scheme guide
The scrappage scheme is already being claimed a success with 35,000 people taking part but latest research from www.parkers.co.uk, a leading car-buying advice website, has discovered that buyers could end up paying more than the original on the road price by the time their finance agreement comes to an end.
Manufacturers that normally offer between 3.9% and 5.9% APR have pushed their finance rates up as high as 10.4% APR when used with the scrappage incentive.
One example was on a new Renault Grand Scenic Extreme:
The 1.6-litre VVT model would normally cost £14,995 at full price. With the scrappage discount and additional money off from the manufacturer this drops to £12,495.
However, if the car was purchased on finance - which would be the main option for many new car buyers - an agreement of 10.4% would have to be taken out, meaning the buyer would eventually pay £15,094 for the car, £99 over the original list price.
Parkers.co.uk also found similar examples at Toyota and Ford, and in some instances it even worked out cheaper to buy the car on finance without the £2,000 scrappage discount.
For a finance agreement at Toyota buyers can normally choose between 3.9% and 5.9% - depending on the length of the agreement and deposit - but to take it with the cash-for-scrap incentive the only option in the highest rate of 8.9% APR.
This means that a new 1.8-litre T2 Avensis with an on-the-road price of £16,565 should drop to £14,565 with the £2,000 cash-for-scrap offer, but eventually costs £17,264, £699 more than the list price.
When buying a Ford Kuga with finance Under the cash-for-scrap plan, buyers are forced to opt for 7.9%. Starting at £21,795, the 2.0-litre TDCi 2WD Titanium model falls to £19,795 with the £2,000 discount, but paying such a high interest means a final total of £22,903.
However, buying a Kuga under the normal finance agreement can be as low as 3.9% APR. Although a deposit needs to be paid on this agreement and it is over 25 months not 36 months, monthly payments are lower and the final amount paid by the customer is also lower at £22,792.
Poor savings
As well as eventually paying much more than the on-the-road price, there are also some offers which mean that buyers save very little - nowhere near the £2,000 discount promised with the cash-for-scrap scheme.
When taking out finance at Skoda the only rate available is 8.9% APR which means saving very little on cars like the new Superb. With an on-the-road price of £15,095, a 1.4-litre S model goes down to £13,805 with the scrappage discount. But under the finance agreement buyers will end up paying £15,762 an overall saving of just £143.
Buying a new SEAT under the scrappage scheme with finance also means a minimal saving. With offers of 0% APR on selected models outside of scrappage, this is raised to 8.5% APR with the scrappage discount.
A 1.2-litre Ibiza SC S with air-con is normally £9,505 on-the-road. This then drops to £7,505 with the £2,000 bonus but buyers end up paying £8,813 - a saving of just £182.
Worst offenders:
Manufacturer's scrappage finance plans** (APR = Annual Percentage Rate):
Renault 10.4% APR
Skoda 9.9% APR
Peugeot 9.9% APR
Alfa Romeo 9.5% APR
Toyota 8.9% APR
SEAT 8.5% APR
Ford 7.9% APR
** Source: Parkers.co.uk
It's not all bad news
In contrast, parkers.co.uk has found manufactures such as Mazda, Suzuki and Honda continuing to offer low finance agreements alongside their scrappage scheme.
Mazda is offering a low rate of 3.9% APR on select Mazda2, Mazda3 and MX-5 models. At the same time Suzuki is continuing to offer 0% APR on every model in the range - except the Alto - with the £2,000 banger bonus. Honda is also offering 0% APR on the Civic, Civic Type-R GT and also CR-V.
