Good economic news seems to be increasing in the media lately. While some sectors like construction are still slow to recover, car sales are up. New car registrations in the UK are up for the first time in 15 months, a good indicator that people are ready to spend. Many of the new car sales can be attributed to government-backed scrap incentives.
The UK scrappage plan offers motorists a 2,000 discount on new vehicles when they trade in a vehicle that is more than 10 years old. The plan was not only set into motion to help car makers and dealers weather the biggest decline in sales since World War II, but also to boost spending and improve environmental records. In order to qualify for the discount, the new car has to meet fuel-economy and emissions standards.
Hyundai and Ford are reaping the greatest rewards and saw the greatest increase in sales in July. Toyota is not far behind, but other car companies that had to declare bankruptcy and are still in the process of restructuring seem to lack the confidence of consumers. Economists still worry that consumers may not be financially stable enough to fully repay the loans, as unemployment rates in many sectors are still at record highs. With mortgage loans facing record threats of defaults, some worry that it may be too soon to relax credit enough to encourage the increase in car sales we are now seeing.
The UK is not the only government offering scrap incentives, it seems that most of Western Europe and the US are doing the same, and all have seen an increase in car sales as a result. In fact, the US program is going so well for automakers that congress is considering pouring more money into the program. Even with this good news and recent boost in sales, car companies are far from getting out of the slump that lasted over a year. Sales are still expected to be down overall in 2009 and 2010, but automakers and dealerships are glad to see any good news. It does show that consumers have put off spending and seem ready to get back in the game, lets just hope that we continue to see other areas of the economy improving and car sales continue to increase when the scrappage plans run out of money.