Earlier in May, a scheme was launched by the UK government that rewarded new car buyers when they scrapped an old car of theirs. Oddly enough it was called the ‘Car Scrappage Scheme’ and it gave car buyers 2000 towards a new car when they scrapped a car that’s more than 10 years old.

The overall cost for the scheme was 600 million pounds. Half of which was payed by tax payers and the other half was payed by the car manufacturers. Even though this is alot of money, it seems to be paying off for the economy.

The total number of registered cars for July 2009 were released last week and it seems to have risen by 2.4% compared to the same month last year. Overall 157,149 new cars were registered last month, overall a 2.4% rise in sales from last July. Out of those 157,000 odd cars, around 33,000 of them were bought as part of the scrappage scheme. This rise of 2.4%, although not alot, is actually the first rise in sales seen in the motoring industry since April last year.

Due to the good result that’s occured from the scheme, many MPs are calling for Lord Mandelson to continue the scheme for 2010. Currently the cut off date for this scheme is February 2010, or whenever the 300 million pounds of tax payer money drys up. However, as it has proved so popular with over 144,000 cars registered with the scheme since it’s start back in May, I wouldn’t be shocked if it was continued.

Car manufacturers will hope that if the scheme is continued, the rise in car sales will continue as more people invest in the scheme.

Even though the scheme has proved to be good for the new car market, it’s not so good for other parts of the industry. The first would be the second hand market. Because of the large amount of cars being scrapped, it’s becoming harder to find a second hand car. The second problem occurs with the cheap car leasing market.

Due to the high number of new cars being registered, the leasing sector is loosing out because people are opting for a new car rather than a Nissan lease whereas they could just scrap their old car and get money off a new one. This problem doesn’t so much affect the van contract hire sector which doesn’t yet benefit from the scrappage scheme.