Car Sales in the UK and the Scrappage Programme

As debt and unemployment numbers continue to rise, politicians in the UK are desperate for some positive signs of growth. One area that has been a definite bright spot is the auto industry. In March, sales were up by more than a quarter compared with last year's numbers.

Does this signal an economic recovery? We'd love to say yes. But the fact is the numbers are a bit misleading. You see, they do not take into account the government's huge scrappage programme. This scrappage programme, sometimes called a scheme by critics, pays car buyers as much as two-thousand pounds when they turn in an old vehicle and purchase a new one.

The programme has been a big success and is clearly responsible for the increase in car sales in the UK . The only problem is that the scrappage scheme expired at the end of March.

Will new car sales continue to increase even without government cheques as an incentive? Most industry insiders say no. And while some of the most optimistic voices are predicting only a small decline, others anticipate a precipitous fall.

However, there is one silver lining. Sales of used cars have actually increased a bit over the past two years, even without the aid of a scrappage scheme. These sales are expected to rise as the UK struggles to find its footing in a difficult economic environment. It is also important to note that auto loans have declined, which should drive desperate buyers to cheaper secondhand cars.