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Back in May, the Government launched a scheme that would reward car buyers when they scrappage their old bangers. Oddly enough it was called the ‘Car Scrappage Scheme’ and it gave car buyers 2000 towards a new car when they scrapped a car that’s more than 10 years old.

600 million pounds was the total price to run the scheme. Out of the total pot required to fund the scheme, half was payed by the tax payer, the other half was payed for by the car manufacturers. Despite this being a large sum to invest in a scheme, it’s certainly proving successful for the market.

The overall amount of new registered cars for this July was announced the other day and they showed a rise of 2.4% compared to July last year. A total of 157,149 cars were registered last month, making it a 2.4% rise on the same time last year. Over 33,000 of the total cars registered were bought as part of the government’s scrappage scheme. Even though a 2.4% rise is not a huge number to be happy about, it’s still good news because this rise is the first seen in the motor industry since April 2008.

Because this is such good news for the industry, many government MPs are calling for Lord Mandelson to extend the scheme further into 2010. Currently the scheme is due to end in February, or when the 300 million of tax payers money runs out. With around 144,000 new cars registered with the scheme since it started, I wouldn’t be surprised if they continued it into 2010.

If the scheme is continued, car manufacturers will be hoping that the rise in cars registered will continue as more people buy into the scheme.

Even though the scheme has proved to be good for the new car market, it’s not so good for other parts of the industry. The first one affected is the second hand car market. Due to the large number of cars being scrapped, the amount of second hand cars on the market are being reduced. The other problem occurs in the cheap car leasing market.

Due to the majority of people buying new cars, leasing companies are missing out as people are not going for a Nissan lease whereas they could just scrap their old car and get money off a new one. This problem has little effect on the van contract hire sector because the scrappage scheme doesn’t count vans.

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