Will the motor industry survive without the scrappage scheme?

darragh o meara

I recently had a conversation with a friend of mine in the trade about wheter the motor industry is being propped up by the government, Both of us agreed that the scrappage scheme was responsible for most of the new 2011 cars on the road but there popped up another few questions that might yet still cripple the industry:

1. As the banks are slowly starting to move on car finance again ( and I mean slowly ) will the motor industry ever get back to a percentage of what it was running at. What I mean is that in the celtic tiger days everyone could get finance on a car so the amount of new cars leaving the showroom was huge in numbers, I remember visiting one dealership who could have you sorted for finance and driving out the gate in about 2 hours once you had all the right documentation!

But the problem now starts where you have people who are now split into a few different groups of buyers:

_ people who can trade their old car in on scrappage and who have saved a few quid to buy a shiney new car.

- People who trade up every two years, These are people who usually have money to spend and not really reliant on finance to pay for the new car. These are also the people who a lot of them wouldnt buy a new car last year because of the stigma of buying a new car in the middle of a recession so as a result you now get a lot of 3 year old cars being traded into dealerships keeping new car sales up.

- Then you have the people who change up every 3-4 years and relies on finance to fund the next purchase, These people would have bought a new car back in 07-08 and would be due to change this year if conditions allowed, but the lack of finance available is limited. I know some of the manufacturers are setting up thier own banks to help get sales moving again but from what I hear the conditions are very strict! This is going to put a slowdown on sales if it is not addressed very soon.

-Finally you have the people who would like a new car and would have no problem in paying for a new car through finance but just cant get finance to fund the purcahse. These are the same people who 3 years ago would have had absolutely no problem in getting finance for a ferrari! but now because of maybe a missed payment or two on the credit history cant get finance to buy a loaf of bread!! This is where I see the motor industry fall again, All along finance funded motor dealerships accross the country and in a lot of cases a dealership would not deal with you unless you were getting finance through them.

For example, I was asked buy a family member to negotiate the purcahse of a new car back in early 2008, I went into the dealership and got a very good price straight deal. I told the salesman that I would be back to him in a few hours with an answer which I did to which he asked me to come in and he'd sort out the finance for me, It was then I told him I had a draft in my hand and would drop it up that evening.. That was the last I ever heard of that salesman!! every time Id ring he was busy and if I called he was dealing with a customer. In ended up dealing elsewhere!

So to sum up my argument, If the people who have the money to buy new with scrappage and the usual few who change regularly dry up will the motor industry survive? Or is there some initiative coming up that will allow people to obtain finance a bit more freely. I can see the recession hitting a lot of people in the near future where they will no longer be able to obtain credit as the list of people who havent had some sort of blemish on thier credit score is diminishing quickly.

Is there an option for the person who had a few money problems but is now back on the road to recovery to finance a new car? Without it I can only see the motor industry go one way after the scrappage scheme is abolished and that is downhill

Anan1

The car sales industry will shrink, but it won't disappear. Given the ratio of good to poor salespeople out there, I think there's more than enough room for a bit of a slim-down.

darragh o meara

darragh o meara wrote: »

If the people who have the money to buy new with scrappage and the usual few who change regularly dry up will the motor industry survive?

Well removing those two groups and the fleet users that leaves the normal Joe Soap who buys on finance, I think that lots of folk will be very very slow to splash out loads of borrowed cash on new motors over the coming years. I know loads of people in well paying, secure jobs who can't wait for the last 12 or 18 month of their car loan to be gone, due to mortgage increases and reductions in take home pay they don't intend getting any more car loans.

doopa

Anyone know what percentage of cars are bought new by private buyers. I was under the impression most new cars sales were by fleet buyers, who may be waiting a year or so longer at the moment between upgrades but who are essentially still buying cars. Scrappage won't affect these people and they tend to have their own finance arrangements anyway.

(My rough estimate (admittedly secondhand hearsay probably) was 50% upwards).