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The short life of the scrappage scheme, the death of 0% interest: How the two are never found together
There are many people out there with bad credit who have been on the lookout for car loans that offer both 0% interest and a nice discount thanks to the scrappage scheme. However, as the latter now begins to near its end, does that mean that 0% interest could be gone for good?
The UK has received a much needed boom thanks to the car scrappage scheme which saw as much as £2,000 docked off the value of a brand new car should a car 10 years older or more be traded in. There wasn’t really any money made from this initiative, it was more of a scheme to kick-start the economy and to ‘help the environment’.
Even though in reality the real discount that consumers saw was probably around £1,000 (that money being the amount the Government contributed to the car scrappage scheme), money was still being saved with car manufacturers offering discounts to appeal to buyers anyway.
Car manufacturers have been fighting for their lives as it is, so offering 0% interest on a car loan in addition to the discounts of the car scrappage scheme was not a practical option for them.
There are now fears that once the car scrappage scheme concludes (this date is estimated to be around October), troubled carmakers may be so cash-strapped that they will not be able to re-introduce 0% interest to consumers.
Some believe that this process could be the start of a very painful cycle, with consumers who have bad credit being deterred by the high interest rates on car loans and what’s more, being denied credit. Meanwhile, the hands of car manufacturers are tied because offering a loan with no interest could lose them too much money.
There have been calls for the Government to extend the car scrappage scheme once the £300m that they have invested into it runs out. However, Lord Mandelson, the Business Secretary, revealed that there were no plans to extend the bill once the provisional funding ran out.
Current predictions predict a dramatic crash in car sales, which will conclude the false optimism that the car scrappage scheme in the UK provided to both consumers and businesses. The steep decline in sales, which have been increasing marginally, could be one of the final devastating blows to a troubled market sector.