When the global recession hit the UK in 2008, it was clear that the government would have to step in. The number one priority was the automobile industry, which had experienced consecutive quarters of negative growth. Their solution was a scrappage scheme that would encourage new car ownership. Under this program, new car buyers received a discount of up to 2000 pounds for turning in any old bucket of bolts. As expected, the plan was a huge success and it carried the industry through the recession, which ended in the last quarter of 2009. In March of 2010, the government ended the scrappage scheme. This decision is expected to have a profound impact on two markets: the new car market and the market for second hand cars. Without government aid, the used car market posted an increase in sales of more than six percent in 2009. Why are used car dealers so confident that sales will increase. Simply put, they don't believe that new car dealers can compete without the help of the scrappage scheme. And industry insiders agree with them. Most believe that the new car market will suffer in the stagnant economy and that consumers will choose cheaper secondhand cars over new ones. In fact, used cars already outsell new cars by nearly three-to-one in the UK. Not to mention the fact that new car dealerships are expected to raise their prices yet again to offset higher prices from the manufacturers.
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