Should you pass up on car scrappage schemes?

Numerous car dealerships are offering “scrappage schemes” in an effort to convince people to trade in their old cars and get a more environmentally friendly model instead. But before you ditch your old banger for a shiny new model, make sure you are getting the best deal for your circumstances.

At the moment, 17 carmakers, including Ford, Volkswagen, Skoda, BMW, Audi and Toyota, are offering scrappage deals. The terms of these deals vary between dealerships but, in general, if you have a car that has “Euro 4” emissions standards or worse – that’s most cars made before 2009 – you could be able to get a scrappage deal on it. For example, BMW is offering £2,000 off a new car if you trade in a BMW or Mini that is emissions-rated Euro 4 or worse.

If you have an old banger, these schemes can be enticing. In the case of Ford’s scheme, “take in your £300 banger and you could be eligible for a £2,000 discount off a new Fiesta”, says The Daily Telegraph. You can check if you car is eligible via the Carwow car-selling platform, for example (for details, see Carwow.co.uk/scrappage-scheme).

However, don’t go charging off to your local dealership on the assumption that you are going to get a great deal for your old heap. With so many carmakers now offering scrappage schemes, some experts are warning that this is not so much about helping the environment as about making a lot more money from an impromptu upgrade cycle. The raft of scrappage deals come at a time when new car sales are down considerably. Sales in July were down 9.3% compared to July 2016, according to data from the Society of Motor Manufacturers and Traders, while sales of diesel cars specifically plunged by 20.1% over the same period.

So, if car dealerships aren’t offering these deals out of the goodness of their hearts, are they really such good deals? Probably not, David Bailey, a car industry expert at Aston University, tells the Daily Express. “It’s not clear that the scrappage deals are worth more than the discounts buyers could haggle anyway, given the softening of the markets,” he cautions would-be buyers.

So if you would like to upgrade your old car, or get rid of your diesel car, there are several other options to explore before you make a beeline for your local dealership. Start by using Carwow’s checker to see if your car is eligible for a scrappage scheme. If it is, find out how much you would get for it and if the dealership limits what cars you can buy as part of the scheme – some, including BMW, will only allow you to buy a couple of their more environmentally friendly, expensive, models.

Then, compare the scrap incentive with what you could get if you sell your car yourself using tools on the Auto Trader website or companies such as We Buy Any Car. You may find that you are better off doing this and then haggling for a discount off a new car instead.

If you sell your car yourself – or scrap it if it is a really old banger – you could be even better off if you buy a second-hand car, with a better emissions rating. With new cars losing 40% of their value in the first year, according to the AA, you would need to get a truly great deal for it to make more financial sense to buy new than to buy second-hand.

In the news…

• Millions of people who were mis-sold payment protection insurance (PPI) are being “misled” into thinking they have until August 2019 to make a claim, reports The Daily Telegraph. The August 2019 deadline was given by the Financial Conduct Authority (FCA). However, the FCA failed to mention that around 5.5 million people were contacted by their banks regarding PPI between 2013 and 2015 and given a three-year deadline to make a claim. If you do miss the deadline, you may still be able to claim following a court case known as “Plevin”. However, this relates to commission earned, and “payouts under these guidelines will be greatly reduced”.

• Higher earners “snared” by the pensions annual allowance taper – which came into force last April – could be forced to dip into their savings to repay tax relief they aren’t eligible for, says Josephine Cumbo in the Financial Times. In the “worst-case scenario”, an individual with “adjusted” income of more than £210,000 who had contributed the maximum £40,000 into their pension could face a tax charge of £13,500. Adjusted income includes not just salary, but employer pension contributions, bonuses, share dividends, savings interest and income from buy-to-let – many of which are “hard to predict at the start of the tax year”. While you can ask your pension scheme to pay the charge direct from your pension fund, HMRC have not made it compulsory for providers to do so for those who “breach the new tapered annual allowance”, meaning that you may have to find the money from elsewhere. But if your “threshold” income, which excludes employer pension contributions, is less than £110,000, you can relax – the rules don’t apply.

• If you own four or more mortgaged buy-to-let properties and want to re-finance, you may want to act fast, warns Martina Lees in The Sunday Times. From next month, stricter lending rules come into force that will make it much more time-consuming and expensive to do so. New Bank of England rules stipulate that each time such landlords refinance one property or buy another, lenders will have to assess their income across their whole portfolio.