Money magic: turning your old car into cash

Scrapping that pile of junk outside your home could be lucrative, but there are several ‘ifs’, says Paul Lewis

Time was when scrap dealers charged you to get rid of your old car. But today that pile of old junk could be worth £2,000 through the government scrappage scheme. But there are lots of ifs.

First: you have to trade it in for a new car. Not a nearly new. Not one the dealer has used as a demonstration model. But an unregistered car that no one else has owned and which is specified for the UK market. It does not have to be “green”, though the chances are it will be greener than the POJ (pile of old junk).

Second: the POJ has to have been yours for at least 12 months when you trade it in. So you cannot buy a POJ from the small ads or your unsuspecting cousin and magically transform it into a two-grand discount!

Third: although it is a pile of old junk, it has to be legal. It must be taxed, have an MOT certificate and be insured. If it is not being used – even if it has a Statutory Off Road Notice (SORN) – it is not eligible.

Fourth: it has to have been registered on 31 August 1999 or earlier. In other words, it is a T-reg car or older. And it must be registered to a UK address.

Fifth: do not delay. The scheme is limited to the first 300,000 people who apply. That may seem a lot but there are more than five million cars on the road that are old enough to qualify. When it’s gone it’s gone. And in any case the scheme ends on 28 February 2010.

If you decide to take part you may also save money on the car tax (known as vehicle excise duty or VED). An old banger will cost either £125 or £190 a year depending on engine size. New cars are taxed at anything from £0 (yes, zero) if they have very low carbon dioxide emissions to £120 if they are middling to £405 if they are real gas guzzlers. So if you buy a small, low-emission vehicle you could find it costs you less each year.

Sadly, your insurer will not join in the money-saving party. There will be a fee of about £20 to issue a new insurance certificate. And the premiums for a new car may be higher.

But if you were thinking of upgrading from POJ to new, the scrappage scheme could save you £2,000.

Paul Lewis is a freelance writer. He presents Money Box on BBC Radio 4

This article is published in the 2 July issue of Community Care magazine under the heading How to drive a green bargain