Scrapping a banger? Beware depreciation, insurance costs

New research from price comparison service uSwitch.com finds that vehicle depreciation will be a “thorn in the side” of the Government’s new car scrappage scheme.

The study finds that the £2,000 incentive offered to motorists replacing old cars will be wiped out in depreciation within just 88 days of purchasing a new vehicle. If 1.5 million consumers take advantage of the incentive, uSwitch.com says, total depreciations would amount to £12.5 billion in just one year.

Despite such depreciation, uSwitch.com’s research notes that motorists still stand to gain other benefits from the scheme. For example, 37 per cent of interested motorists say their main reason for participation would be to swap their car for a greener model. And 8 per cent they would participate to “do their bit” to support the struggling car industry.

“The Government’s car scrappage scheme has been introduced to give the ailing motor industry a much-needed
shot in the arm by enticing motorists to participate with a £2,000 incentive,” said Mark Monteiro, insurance expert at uSwitch.com. “Any motorists tempted to take advantage of the car scrappage scheme should research the cost of insuring their desired new vehicle as a matter of priority, as the cost could be significantly higher than they are currently paying for their old banger.”