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Peter Jones, the incoming chief executive of car dealer Lookers, today added his voice to the growing clamour for Lord Mandelson to extend the Government's car scrappage scheme.
“I'm very, very enthusiastic about the scheme,” said Jones. “It has increased traffic through our showrooms and pushed up new car sales.
“We are heading towards 3500 cars ordered since the scrappage scheme was launched in May. Lots of people are buying the smaller economical cars, like Hyundai and Kia, but we've also had orders for Land Rovers and other high-end cars.”
The Government set aside £300 million for the scheme, under which it contributes £1000 and manufacturers provide another £1000, for people who bring in ten-year-old bangers to exchange them for new cars.
Earlier this month, Mandelson said 155,000 out of a possible 300,000 cars had been ordered under the scheme.
Of these, around 81,000 have been delivered with the rest yet to pass through dealer showrooms.
Jones believes the scheme is effectively self-funding, because the government's VAT income on any car sold for more than £7500 is at least £1000. He said: “Customs and Excise should talk to Business and Enterprise and look at extending the scheme.
“After all, there are nine million cars which are more than ten years old in this country, so the 300,000 being funded so far is a drop in the ocean.”
He said that while the new car market had remained tough over the first half of the year, Lookers other three activities — used cars, aftersales and independent parts distribution — have been firing on all cylinders.
Today, the company reported figures well ahead of City expectations. Lookers, which operates 121 franchises, having closed 21 in the last year, reported headline profits up 14% to £17.6 million on revenues 16% lower at £870 million.
The firm raised £76.5 million through a share issue at the end of June, and declared at the time that it will not pay a dividend this year. The share issue and negotiation of £210 million of new borrowing facilities cost it almost £12 million.
Discussing its new debt arrangements, the company said: “While the new facilities provide a sound financial structure for the group in the medium term, they are considerably more expensive and onerous than the previous facilities, as a result of the conditions in the banking industry.”
Jones said the fund-raising had been well-supported by shareholders and means the company is now well-placed to take advantage of any of its weaker rivals. He said:
“There are always buying opportunities during a downturn. We are in a good position to take advantage of anything that arises.”
