Back in May this year, the UK government launched a scheme that would reward car buyers when they scrapped their old cars. 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.

The cost of the scheme was 600 million. 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 total number of registered cars for July 2009 were released last week and it seems to have risen by 2.4% compared to the same month last year. Overall 157,149 new cars were registered last month, overall a 2.4% rise in sales from last July. Out of those 157,000 odd cars, around 33,000 of them were bought as part of the scrappage scheme. The last sales rise seen was back in April 2008, so although 2.4% is not a huge number, it’s still a number to be happy about.

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 cut off date for this scheme is February 2010, or whenever the 300 million pounds of tax payer money drys up. However, as it has proved so popular with over 144,000 cars registered with the scheme since it’s start back in May, I wouldn’t be shocked if it was continued.

Car manufacturers will hope that if the scheme is continued, the rise in car sales will continue as more people invest in the scheme.

Despite this being good news, there are some downsides to the scrappage scheme. The first would be the second hand market. As everyone is scrapping their old cars, many people are finding it hard to find a suitable second hand car. The other sector affected is the cheap car leasing market.

Due to the high number of new cars being registered, the leasing sector is loosing out because people are opting for a new car rather than a Nissan lease when they can just scrap their older car for savings off a new one. Luckily, this problem doesn’t so much effect the van contract hire sector because the scheme doesn’t benefit van scrappage as yet.

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