Over 60’s benefit from scrappage scheme

Those in the UK aged 60 and over will be amongst those benefiting from the vehicle scrappage scheme as a result of releasing equity from their homes, according to research from Key Retirement Solutions.

Key's analysis show's that 10% of equity release customers who released equity between January and May of this year have used equity release to buy a new car. For the month of May, when the scrappage scheme officially launched, the percentage signing up for a new equity release scheme who were buying a new car was 16%. Many releasing equity from their homes have multiple reasons for doing so, just one of which may be to purchase a new car; home improvement, holidays and repaying debt feature amongst the many uses.

Key expect the number using equity release to purchase a new car to increase further as more new enquiries are coming from customers quoting that the scrappage scheme has motivated them to buy a car now rather than later.

The average amount being released to purchase a new vehicle is £8,710. Key predict that approximately 25,000 equity release plans will be taken out during 2009 which means that, based on the current trend, almost £22m will be released to purchase a new car.

The Society of Motor Manufacturers and Traders' (SMMT) figures for the month of May reveal that sales of small cars has increased, which is exactly what the scrappage scheme is aiming for. "The mini segment was the only segment to record volume growth, up 50.3%. The supermini segment saw market share rise, from 32.2% to 34.6%, and Ford's Fiesta was again the overall market's best seller in both the month and year-to-date."

According to the Retail Motor Industry Federation (RMIF) and Automotive Management, so far 8.1% of all vehicles purchased under the scheme have been made by the 60 and over age group. The survey also reports that the majority (75%) of all purchases made are made without utilising consumer finance. This indicates that purchases are being made either from savings or other sources of funding.

Dean Mirfin, Key Retirement Solutions Group Director, said: "Purchasing a new car under the vehicle scrappage scheme is proving beneficial not only to younger, but also to older, households. For those who do not have the capital or income available to support a new car purchase, many see this opportunity as too good to miss, and so are looking to equity release as the solution. The further increased interest that we are seeing from those aged 60 and over since the scheme launched should no doubt result in more uptake from this age group. The over 60's will clearly be playing an important part in helping fuel the motor industry during 2009 and beyond."

For anyone looking to release equity from their home, Key's independent guide to equity release is the best place to start. This can be obtained from keyrs.co.uk/equity-release-guide where the guide can be downloaded.