Buying a new car in the midst of a recession might not seem like the brightest idea given that many households across the country are strapped for cash, but there are some pretty compelling reasons for buying sooner rather than later.
First off, you can cash in on the savings that are up for grabs through the scrappage scheme, and you can also get your new run-around on the road while the VAT reduction is still in force.
In fact, if you’ve been toying with the notion of trading in your old motor for a smart new set of wheels, now could be the time to act.
Bangers for cash
The aim of the scrappage scheme, introduced by the Government back in May, was to get older vehicles off the road, and to encourage consumers to invest in newer, safer – and potentially even more environmentally friendly – models.
Under the incentive scheme, a driver can get £2,000 off a new car if they trade in a vehicle more than 10 years old – provided they’ve owned it for at least 12 months.
At the end of September, the Government announced plans to extend the scheme by £100 million – or 100,000 more vehicles -which means 100,000 more drivers are now being given the opportunity to enter into the scheme.
Boost for business
The scheme has certainly had the desired effect of pulling people into showrooms, and the new “59” registration plates in September fuelled further interest.
According to the latest figures, there was an 11.4 per cent year-on year increase in new car sales in September (*).
At the same time, industry sources estimate that 70 per cent of the drivers taking advantage of the scheme would not have otherwise bought a new car in 2009.(*)
Time is running out
While the scrappage scheme has been a real boost for the ailing motoring industry, it does have a limited life-span, as the initiative has to end in February 2010 at the latest – and earlier if the allocated funds run out.
This means that if you want to make the most of the savings up for grabs, you need to act fast.
If your motor is eligible for the scheme, you are, for the time being, safe in the knowledge that your car is worth at least £2,000 – but once the scrappage scheme comes to an end, this will no longer be the case.
In fact, without the scrappage scheme, a new small car which would have cost £4,000 will end up costing £6,000.
Beware the VAT hike
As well as the savings offered by the scrappage scheme, another big advantage to buying now is that you can get in ahead of the VAT hike.
From the end of December, VAT is going to increase by 2.5 per cent – back to 17.5 per cent – which will push the price of your new purchase up that little bit more in the New Year.
Don’t forget depreciation
Nonetheless, while it makes good financial sense to buy now to cash in on the scrappage scheme and the VAT reduction, you do need to do your homework.
Crucially, before rushing out and buying a brand new car, you need to factor in vehicle depreciation.
This will have a big impact on the costings, so make sure you consider this, as the savings you make through the scrappage scheme could soon be wiped out.
Reduce your motoring spend
There are also a whole host of other ways in which you can drive down the cost of owning a car:
* Avoid harsh braking to eliminate over-heating of the brakes which causes rapid wear of brake linings and discs.
* Avoid harsh acceleration and keep your tyres correctly inflated to help improve fuel economy.
* De-clutter your car, as the lighter it is, the less effort it needs to make it accelerate; also consider removing the roof rack.
* Find the cheapest petrol station at www.petrolprices.com and make the most of supermarket petrol promotions.
Finally, if you are tempted to take advantage of the car scrappage scheme, make sure you research the cost of insuring your new set of wheels, as the cost could be significantly higher than the price you pay at present – especially if you currently own an old banger.
The key is to check the car insurance group, or the make and model of the chosen car – to ensure the new premium is still within budget.
(*) Society of Motor Manufacturers and Traders (SMMT) car registration figures for September.