Car scrappage schemes keeping prices high, warns EU

CAR scrappage schemes, like that introduced last year, may be boosting sales, but they are keeping prices high too, according to the EU.

The price of cars dropped in 2009 and sales have increased dramatically in the first six months of this year according to the latest figures.

CSO statistics show that car sales at 8,304 in June jumped by almost 60% compared to the same month in 2009. The first six months saw a 70% increase in the sale of new cars, but this was little more than half what was sold in the same period in 2008 before the economic crisis fully hit.

Car prices fell by 7.9% in 2009, but taking into account deflation of 2.9% the real drop was 5.5%, according to Eurostat.

Nine other countries experienced bigger price decreases as the cost of buying a new car fell in 24 of the 27 member states. They increased in Britain, but it’s still the cheapest country for vehicles.

Germany and France had scrappage schemes, while in Ireland scrapping a car 10 years or older entitles you to a VRT reduction of €1,500 on a new car. A European Commission expert said they had served to cushion the fall in sales during the recession.

“But car prices might have gone even cheaper if we did not have the schemes in place,” he said.

Germany and France experienced more moderate price reductions of less than 1%. In Slovenia the drop was more than 13%.

The huge variation between the manufacturer’s price has dropped too, with the average price variation now 8.5% – compared to 34% in food items.

The cost to the consumer, however, varies much more once countries add on taxes. In Ireland the manufacturer’s price for a Peugeot 407 is the cheapest in the EU at €23,560, but it jumps to €40,200 after VAT and excise duty.

The manufacturer’s price for most cars shipped into Ireland is about the EU average, except for three makes that are the most expensive:

The Hyundai i30 ships for €14,620 while the cheapest is in the Czech Republic where it is €5,704. The post-tax price in Ireland is €18,500; The Nissan Micra at €10,170, compared to the cheapest in Malta at €6,470. It sells here for €14,340.

The Toyota Auris at pre-tax €17,164 is the most expensive compared to Denmark where the manufacturer’s price is €12,855. The post-tax price in Ireland is €25,330 and in Denmark 33,800.