Scrappage scheme hit by depreciation

May 28 2009

New research has claimed that the introduction of the scrappage scheme in the UK will have little impact on finance deals for cars because new vehicles are depreciating in value so quickly.

According to a study carried out by price comparison site uSwitch, the £2,0000 incentive to replace an old car with a brand new one will be wiped out in just 88 days because new cars are seeing their value fall quickly.

Motorists could be encouraged to sell their new car before then in a bid to make the most of the money on offer under the scrappage scheme, which would also result in a greater flow of vehicles into the used car market.

"When choosing a new vehicle, motorists should ensure they research the rate of depreciation of their desired new car, as research highlights how some of the top ten most popular vehicles hold their value far better than others," warned Mark Monteiro, insurance expert at uSwitch.

The government announced the creation of the scrappage scheme in its Budget last month and the initiative came into force earlier in May.

It is hoped the scheme will stimulate more new car purchases, as the sector suffers heavily during the economic downturn.

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