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The effects of the credit crunch, recession and general economic slowdown in the UK over the course of the past couple of years have had a crippling effect on the economy and certain sectors of business in particular. Many retail sectors have seen a dramatic decrease in the amount of sales they have made, as consumers have become ever more cautious about what they spend their hard earned cash on, tightening their purse strings in order to build up an emergency fund to see them through a potentially difficult time.

In particular the number of personal loan sales has dropped significantly, as individuals are either reluctant, or unable to obtain a loan for the larger items they would ordinarily purchase if their financial and economic position was stronger than it has been recently. As a result of this, one sector which has been hit particularly hard by the economic slow down and recession has been the motor industry, especially where individuals require a car loan in order to make their purchase.

Both the motor retail industry and the UK Government have both taken measures and introduced plans to try and help the motor industry survive the recession and encourage people to support the industry and buy a new car, where maybe they would not have done so otherwise. This may be through special discounted deals, or extra features on new vehicles from car dealers, or offers of a cheap loan or car finance and, of course, the benefits offered by the government through their car scrappage scheme, to try and encourage people with cars more than ten years old to buy a new vehicle.

Although money has been tight for many people and car loans have been scarce, or difficult to obtain due to much tighter lending criteria from personal loan and finance companies, the Government’s car scrappage scheme appears to have been a great success and has gone a long way to rescuing the motor industry in the UK. The scheme was first introduced in April last year and was designed to offer support to the motor trade and also remove a large number of cars more than ten years old from the roads of Britain, thereby getting rid of a large number of potentially dangerous as well as environmentally unfriendly, petrol drinking and polluting vehicles.

The scheme offers someone who trades an older car for a brand new one a minimum value of £2,000 for their old vehicle, £1,000 of which comes from the Government and the other £1,000 from the manufacturer. The vehicle must be a car or van more than ten years old and must have been registered with the present owner for at least twelve months prior to the sale.

The scrappage scheme was intended to run initially for a period of just six months, but in September last year it was decided to extend the scheme until the end of February this year, with extra Government funding being made available to pay for the extension. As the scheme approaches its end date, popularity for scrappage deals is increasing, particularly as car loans and finance are becoming more available and cheaper.

Since the scrappage scheme was launched nearly 319,000 vehicles have been traded in under the scheme, with many people taking out either personal loans or car loans to fund their new purchase. In December last year 21 per cent of all new car sales were made under the scrappage scheme.  As a result of this the Government now say that around 75 per cent of the funding for the scheme has now been used up and there is only enough money left for around 82,000 new car deals under the scrappage scheme.

Whilst the scrappage scheme has proved extremely popular amongst those people with older cars, there are still a large number of people who run newer vehicles and like to change them on a regular basis, every tow or three years or so. Once again, largely due to the effects of the recession, many of these individuals who would ordinarily change their car every two years, have reviewed their situation and decided to keep their existing car for a bit longer. For these individuals, there is no Government incentive to encourage them to change their car, such as the scrappage scheme and therefore the pressure lies with motor manufacturers and car dealers to entice potential customers with special deals and cheap loans.

Motor manufacturers and car dealers are currently offering a range on incentives to keep their businesses afloat and encourage people to continue to buy new cars. Many have reduced their prices on new vehicles and added additional spec on their range of vehicles. Extended warranties and things like free road tax and free insurance deals offer customers the prospect of low cost and trouble free motoring for a few years, which can often work out cheaper than having to pay for the repairs on an older car.

Many dealers are also offering cheap loans or car finance, sometimes even on a 0 per cent interest rate for a few years, providing that the buyer is able to put down a substantial deposit of usually around 50 per cent, an amount which is often covered by the trade in price of their old vehicle. As an additional benefit to buyers, a number of dealers are offering their own particular twist on the Government’s scrappage scheme, either by offering a larger amount than the usual £2,000, possibly even double, or by extending their own offering to include cars and vans which are less than ten years old.

Although most motor manufacturers and car dealers offer their own finance packages and car loan schemes, which in many cases are cheaper than the equivalent bank loan or personal loan from an alternative loan company, it is still a worthwhile exercise for someone who needs a loan in order to buy a car, to shop around the various alternatives on offer, before they simply take whatever package the car dealer has to offer.

If nothing else, knowing what is on offer will give a buyer more bargaining power with the dealer and they might even be able to get themselves a better deal. It is always worth talking to your own bank when looking for a new personal loan, as they already have a record of your financial situation and may be able to offer a cheaper rate. It can also be advisable to visit one of the many price comparison websites to check out the range of loans on offer across the market place and it is always worth seeking professional advice from a financial adviser or loan broker who will have access to a variety of personal loan deals across the whole of the market.

Although we have been through an extremely difficult time financially and economically over the course of the past couple of years of so and, even though we are seeing signs of the situation improving slightly, it looks as though we are in for a long and slow recovery, for someone with some available disposable income, it could be that there has never been a better time to buy a new car, particularly with some of the deals and loan offers which are available at the moment. But if your car is more than ten years old and you are thinking about taking advantage of the scrappage scheme, don’t wait too long as the money is starting to run out and the deal will finish at the end of February this year.