The car industry has reacted with dismay at the details of the scrappage scheme announced in the Budget today.
Chancellor of the exchequer Alistair Darling revealed that the government will give £1000 to people scrapping cars 10 or more years old, if the manufacturer of the new car that is being bought agrees to fund a further £1000 discount.
Although individual car manufacturers are refusing to comment about the agreement on the record, one official of a major UK brand told Autocar, "They are putting in less than any other European government and expecting us to put in more than any other European industry. It's a typical fudge so they can shift the blame if we don't sign up to the deal.
"There isn’t £1000 in profit in a small car – and if we sign up to the deal then we have to agree to fund a blanket £1000 discount on every model in our range.
"It's also not clear how this will tie in with our existing offers. If it's allowed then we may have to offer different deals for scrappage or non-scrappage customers; otherwise we could be funding as much as £4000 off some cars."
In today's Budget, the chancellor announced that when a car more than 10 years old is scrapped the government will offer a £2000 discount on a new car.
There will be £300 million of funding put into the scheme, which will run from mid-May until March 2010, or until the government funding has been used up.
Dealers of participating manufacturers will be required to do all the paperwork for the car buyer, and arrange for the old vehicle to be scrapped.
The old vehicle being scrapped must be a passenger car or small van up to 3.5 tonnes, registered in the UK on or before 31 July 1999, currently registered with the DVLA to a UK-domiciled registered keeper making the application or on a SORN notice, have a current MOT test certificate, and have been continuously registered to the owner for the 12 months precedeing the purchase.
The new vehicle must be a passenger car or small van up to 3.5 tonnes, first registered in the UK on or after the date the scrappage scheme is launched and be the first registration for the car, be a UK-specification car and registered to the same registered keeper as the vehicle being scrapped.