The UK government’s £2,000 scrappage incentive for cars over 10
years old has given a boost to dealerships, accounting for an
estimated 60,000 extra sales between the scheme’s launch on April
22 and June 7, according to the Department for Business, Innovation
Business secretary Lord Mandelson said: “Consumers
know a good deal when they see one. These figures speak for
themselves. Car manufacturers continue to report on the success of
the scheme with rising sales. It is the boost that the industry
However, motor finance providers may not be
benefiting to the same degree, as evidence has emerged showing that
consumers are using methods such as equity release to fund their
new car purchases, rather than point-of-sale finance.
Research conducted by Key Retirement Solutions
found in May, the scrappage scheme’s first full month of operation,
16 percent of equity release customers said the money was to go
towards a new car, up from 10 percent in the first four months of
The average amount released is £8,710, with Key
estimating that around 25,000 equity release plans will be taken
out this year, freeing up £22 million in cash to pay for new car
A survey undertaken on behalf of the Retail Motor
Industry Federation found that 75 percent of purchases made under
the scrappage scheme did not use consumer finance.
“This indicates that purchases are being made
either from savings or other sources of funding,” Key said.