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When the Government introduced its car scrappage scheme last year, many people (and I have to include myself in this number!) were quite cynical about the potential success of such a scheme, without the additional government funding of cheap loans to help individuals purchase a brand new car.

The car scrappage scheme allows an individual an allowance of £2,000 on their old car against a brand new one, providing that the car is more than ten years old and has been owned for more than twelve months. Twelve months on from the launch of the scheme and I am quite prepared to say that I stand corrected, as it would appear that the scheme has not only been a success for the motor industry, but also for the car loan industry.

The increase in the number of new car sales since the launch of the scrappage scheme has been well documented in the media over the course of the year, but what has not been commented on is the increase in the number of personal loans being taken out for the purpose of car purchase.

New figures from Sainsbury’s bank have shown that there has been an increase of 37 per cent in the number of car loans and personal loans for car purchase, since the beginning of the scrappage scheme. Sainsbury’s claim that there has been an additional £16.5 million worth of loans applied for each month since the scheme was launched, with the average new car loan being worth £7,515.

Due to the current success of the scheme, the government has announced that it is to be extended to the end of February next year (and possibly beyond?) and it is providing £100 million in additional funding to run the scheme.

Stephen Baillie, head of loans at Sainsbury’s bank commented that it is “Hopefully a good sign that the motor vehicle market is coming back to life.”