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Lending a hand, borrowing time: How car loans could be even harder to find in four month’s time
The car market is struggling and there has been a resurgence in sales thanks to the car scrappage scheme launched in the UK. The scheme allows consumers to receive a £2,000 discount on certain cars should they choose to trade in a car that is more than ten years old.
Even though car loans have already been hard to obtain (even with this discount deducted), particularly for those with bad credit, it is feared the situation could get worse from September onwards – as the funding for the scrappage scheme is running out.
In recessionary times, the scrappage scheme has proven increasingly popular with people who have been looking for a way to get a loan for less money. The fears of the funding for the scheme set up collaboratively between the Government and car manufacturers running out comes six months earlier than expected.
The estimated month of the fund running dry is in October. In September, car manufacturers usually see their highest sales for the year. This is in part due to the introduction of new number plates. There is a high amount of orders to be involved in the car scrappage scheme anticipated.
There are no plans to extend the car scrappage scheme, resulting in dire implications for those who have bad credit who were hoping to receive a significant discount on a car. The discount consisted of £1,000 each from Government funding and car manufacturers respectively – with an estimated £600 million worth of investment believed to have been put into the scheme in total.
The £2,000 discount has been a godsend for people who are already struggling with bad credit. The deduction of the significant amount of money off designated cars makes it slightly easier to obtain a loan, however according to The Society of Motor Manufacturers, trying to get credit is still very difficult for consumers.
There is already a waiting list in the people who are hoping to obtain such a car loan. The prospects are not looking good and for people with bad credit, the chances of getting a car loan are looking slimmer without the opportunity that the car scrappage scheme provided.
Paul Newton, is an automotive analyst and believes the lack of credit available will mean car sales are hit hard: "The ending of the incentive is bound to have a deadening effect on car sales,” he said.