Car sales get a boost from scrap scheme

THE government&rsquo;s &ldquo;cash-for-bangers&rdquo; sweetener scheme helped boost new car sales by nearly a third last month, compared to the same time last year.<br /><br />The incentive programme contributed to a 32 per cent rise in new car sales to 168,942 in October against 128,352 a year ago &ndash; the fourth monthly increase in a row and the strongest this year, according to the Society of Motor Manufacturers and Traders (SMMT).<br /><br />Customers trying to avoid the planned increase in VAT sales tax in January also boosted demand, SMMT chief executive Paul Everitt said.<br /><br />&ldquo;October has seen this year&rsquo;s biggest monthly increase in registrations, with the successful scrappage scheme accounting for over 20 per cent of them,&rdquo; Everitt said.<br /><br />The scrappage scheme gives drivers &pound;2,000 to trade in cars more than 10 years old against a newer model.<br /><br />The scheme, co-funded by the car industry, has proved popular and the government is boosting funding to include an extra 100,000 vehicles.<br /><br />Analysts said the scrappage scheme&rsquo; overall boost to the economy depended on how far it lifted overall consumer spending.<br /><br />&ldquo;Hopes that significantly higher car sales would help the UK economy return to growth in the third quarter, as had been the case with both Germany and France in the second quarter, proved misplaced,&rdquo; said Howard Archer, economist at IHS Global Insight.<br /><br />&ldquo;Nevertheless, the further marked improvement in car sales should help the economy to finally return to growth in the fourth quarter.&rdquo;<br /><br />But plummeting car sales, heavy discounting and a drop in levels of servicing work have had a catastrophic effect on the UK&rsquo;s car retail market. <br /><br />Ernst &amp; Young will show today that franchised dealership insolvencies doubled from 24 dealer insolvences to the end of August this year, compared to 12 for the same period last year.