A scrappage scheme for cars of ten years or older has been introduced in the Budget. The scheme will mean a €1,500 reduction of Vehicle Registration Tax (VRT) on the purchase of a new low-emissions car when an applicable used car is traded-in against it.
An estimated 600,000 used cars could be eligible, according to the Society of the Irish Motor Industry (SIMI).
While it only applies to the purchase of new cars with emissions of less than 140g/km, versions of many mainstream family cars and premium models still qualify. Of the 57,151 new cars sold so far this year, 66.5 per cent had emissions that would qualify under the scheme.
Along with most small city cars and superminis, several diesel versions of family cars like the Ford Mondeo, Renault Laguna and VW Passat fall into the scheme, along with variants of larger premium models such as some diesel versions of Audi's A6, BMW's 5 Series, Volvo's S80 and Mercedes' E-Class.
Several sports cars, such as the 2-litre diesel Audi TT will also qualify. Car firms have reacted quickly by offering their own discounts on top of the Government's scrappage deal.
The scheme will run from January 1st for one year. Cars eligible for scrappage must have been registered to the owner for at least 18 months prior to scrappage and must be scrapped 60 days before or after the new car is registered. The used car must have a valid NCT certificate or one that expired less than 90 days before being scrapped. It will however, apply to cars that failed the NCT test within the previous six months. Finally the cars must have been insured for at least 12 months in the 18 months prior to being scrapped.
Speaking immediately after the Budget speech, Alan Nolan, director general of SIMI, said the scheme was a great relief to industry. "Given the terrible year we've been through, this gives those working in it a sense that perhaps the worst may be over. And for customers the rebate of €1,500 is substantial enough to make a difference on the price of the smaller cars that will be bought under the scheme."
New car sales are expected to end the year at 57,000, down 62 per cent on last year. SIMI estimate the scheme could result in an increase in new car sale of between 10,000 and 20,000 new cars. "With this scrappage scheme next year's sales could be brought up to 65,000 or 70,000," said Mr Nolan.
Scrappage schemes have already been introduced in 12 other European countries with positive results. In Britain it turned a 30 per cent decline in new cars sales in March into a six per cent rise in August. Germany's scheme also led to an increase of 18 per cent in sales in the first quarter of 2009.
In their pre-Budget submission SIMI had said that over 10,000 job had been lost in the industry since the onset of the recession, while over 70 motor-related businesses had closed in the first nine months of the year.
A previous scrappage scheme ran from July 1995 until the end of 1997, with up to 65,000 new cars sold under the scheme.
In addition to the scrappage scheme the Minister for the Finance announced a new carbon tax on petrol and diesel prices from midnight tonight. It will add 4.2 cents to a litre of petrol and 4.9 cents to a litre of diesel.