Tuesday, June 23, 2009

Scrappage creating small cars shortage

Carmakers may limit supplies of small cars to the UK and give greater support to scrappage schemes in mainland Europe because of the weak pound, according to used car specialist Glass's Guide.

Glass's Guide managing editor Adrian Rushmore said some small cars, already in demand before the introduction of the scrappage scheme, were in short supply.

"It is possible that certain models simply won't be available within the scheme's stipulated 16-week timeframe for delivery.

"This situation will be aggravated if manufacturers limit supply to the UK because of the low value of sterling against the euro, recognising that it may be more profitable for them to support scrappage schemes elsewhere in Europe," said Rushmore.

Halo effect
Rushmore said the scrappage scheme is having a ‘halo effect' that benefits much of the used car market."

Glass's said some buyers will sell in-demand small cars bought on the scrappage scheme for a profit.

"Superminis such as the new Ford Fiesta, Fiat 500 and Citroen C1, a profit of up to £1,100 could be available if the consumer had received the full scrappage trade-in discount and then sold their new car privately after taking delivery.

"The potential profit is greatest for those cars where the nearly-new value is currently high in relation to the list prices, notably small, affordable cars with low running costs," said Rushmore.

Windfall profits
"Extended new-car delivery times are supporting these windfall profits, because prospective buyers not eligible for the scheme are more likely to gravitate towards second-hand examples - indirectly boosting residual values - rather than suffering the wait for a new model.

"We expect that some franchised dealers will be pleased to secure unused examples of these popular, newly-registered cars, despite the inflated prices, because their demonstrator stocks have been depleted over recent months. It is likely they would find a buyer quickly and still clear an acceptable profit."

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