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Page last updated at 06:59 GMT, Monday, 18 May 2009 07:59 UK
'Bangers for cash' scheme starts

Old car

From today, owners of cars 10 years old or more will be able to get £2,000 if they trade in their old model and buy a new one.

The government scheme will last until the beginning of March 2010 or until 300,000 vehicles have been scrapped and is designed to kick-start demand in the car market.

To take part in the scheme, drivers must have owned the vehicle being scrapped for at least 12 months before the new car is ordered.

Vehicles eligible for scrapping will also have had to be registered no later than 31 July 1999.

Under the scheme, the government provides the first £1,000 with the manufacturer providing at least a similar amount.

Price comparison company doesn't think the scheme will work because of depreciation.

They say the £2,000 "cash for bangers" incentive will be wiped out in 88 days due to new cars losing their value.

Mark Monteiro from the company said: "When choosing a new vehicle, motorists should ensure they research the rate of depreciation of their desired new car, as research highlights how some of the top 10 most-popular vehicles hold their value far better than others.

This scheme will enable many motorists to buy their first brand new car

AA president Edmund King

"Any motorists tempted to take advantage of the 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."

But AA president Edmund King doesn't agree. He thinks the scrappage scheme will benefit thousands of people.

"This analysis is irrelevant and misleading. If you are only going to keep a car for 88 days it is not worth buying one.

"Most consumers taking advantage of the scrappage scheme will have had their old cars for many years and therefore are likely to hold on to their new car for at least three years.

"Depreciation is only a real issue if people look to sell their car within a year or so.

"This scheme will enable many motorists to buy their first brand new car and as long as they keep their car for three years the economy, environmental, safety, servicing and reliability advantages will far outweigh any depreciation."

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