The first sign that the UK economy was heading into a protracted recession was the unprecedented decline in the new car market. In the first quarter of 2008, sales were down by a jaw-dropping 38 percent from the previous year. As a result, the government felt it necessary to create a massive scrappage scheme to keep the market afloat.
With a budget of four-hundred million pounds, the scrappage scheme was enacted in the summer of 2008. Under the conditions of the program, each car buyer who traded in an old clunker and purchased a new car would receive a discount of two thousand pounds.
The scheme was an unmitigated success and led to three consecutive quarters of growth. At the same time, the used car market was able to keep it head above water without the need of government aid. In fact, sales of used cars increased by 6 percent in 2009. The experts are predicting another banner year in 2010, especially since its main competitor, the new car market, is expected to struggle mightily. There are several reasons for this. The first and most obvious is that the government-run scrappage scheme came to an end in March of 2010. Industry insiders are anticipating sales declines of up to a quarter over the summer as shoppers opt for cheaper secondhand vehicles. We also know that many automakers have been forced to raise their prices due to the weakening pound. That means that the average new car will cost about twenty-five-hundred pounds more than it did last summer. Not many people can afford a price increase of fifteen percent on the average vehicle.
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