Car scrappage scheme announced as the Chancellor outlines the 2009 Budget.

A widely anticipated car scrappage scheme, offering motorists up to £2,000 off the price of a new car for scrapping their old car, has been announced in today’s Budget (22 April).

The Chancellor of the Exchequer, Alistair Darling, has announced that from next month until March 2010 motorists to get £2,000 discount on new cars if they trade in cars more than 10 years old.

Following several poor trading updates from across the car industry, and the March UK car sales report from the Society of Motor Manufacturers and Traders (SMMT), which detailed a massive 30.5% drop in the number of UK car sales, the move was widely predicted by commentators.

Motorists will have to fulfil a number of criteria including showing evidence that they have been the registered keeper of the vehicle for the previous 12 months before ordering the new car.

The government will provide £1,000 with the industry expected to provide the other half.

However, there is still a big question mark over whether this practice of a ‘scrappage scheme’ will actually help the car manufacturing industry in the long term. In Germany a similar scheme has already been introduced. Otherwise known as the ‘Environment Bonus’ or more commonly - ‘Old Banger Bonus’, anyone with a car that is at least nine years old can apply to receive €2,500 (£2,250) off the price of a new car. Many manufacturers are seeing cars fly out of the showroom, with Opel claiming a 50% increase in orders in Q1 2009 compared to the previous year.

Although, as the BBC have recently reported, Joerg Maltzen, a journalist at Europe’s biggest-selling car magazine, warns it could be just a temporary effect and comments: “The people who are buying the cars now will not buy next year – so we’re all expecting a big slump.”

The UK will have to wait and see whether this scheme actually proves whether it is worth the investment. 

The Budget is not, however, proving to be good news for all motorists. The announcement that there will be another fuel duty rise in September will hit pockets hard. A 2p rise will be followed by a 1p a litre rise above indexation each April for the next four years.

The RAC’s Motoring Strategist Adrian Tink called the move “a brutal blow” and said: “It’s time for the Government to stop treating motorists’ pockets as a bottomless pit of money and recognise their right to drive at a fair, affordable price.”