The Chancellor, Alistair Darling, remains in deliberation over whether to introduce a new car scrappage scheme into the UK market. With the budget due this week, a number of concerns exist about the car scrappage scheme, both within the car and car finance industries, and in the government.

There is no denying that the motor vehicle sector in the UK is an important one. As many as 800,000 people work in jobs relating to the car industry. Already, major car companies such as Honda, Nissan and Jaguar Land Rover have cut jobs and production. Many critics of the motor industry say that there has been little reaction to change, and this has exacerbated the problem.

A car scrappage scheme could cost upwards of £500 million, and Darling will be keenly considering whether this expenditure will genuinely help to repair the stricken motor industry. At this stage, it remains unclear whether car finance companies will be given access to the special liquidity scheme.

The precedent support car scrappage, with efficient schemes operating in Germany. However, new cars are more expensive in the UK, and personal debt is much higher. Vehicle finance experts fear that car scrappage would help foreign manufacturers more than the local economy.