FOR every motorist who buys a new vehicle under the new Car Scrappage Scheme before the Government’s promised £300m subsidy runs out, another four drivers could be left disappointed.

That’s an early prediction by Experian, the credit scoring specialist, which thinks 1.5 million drivers could be tempted by the scheme outlined by the Chancellor Alistair Darling in his April Budget – and swiftly dismissed in some quarters as “a load of old iron”.

Are 1.5 million drivers still dreaming of a gleaming new motor? Despite scepticism, headline prices of many new vehicles have fallen sharply – for buyers able to present a qualifying old banger of at least ten years old.

To the Government discount on a new car of £1,000, dealers can add a further discount of £1,000 (and possibly more) from 38 manufacturers signed up to the scheme.

If you really want a new car, it plainly makes sense to consider getting one now – or at least before the scheme expires, at the latest in March next year.

On-the-road price for a fivedoor Kia Picanto saloon is now £4,195. My local Renault dealer says a Clio Extreme is down from £9,995 to £6,495, while a Peugeot 207 Verve falls from a list price £12,040 to £8,740 under the scheme.

Consumer group Which?

reckons astute buyers of new Ford Mondeos might save £4,500 by the scheme.

To qualify for these knockdown prices, consumers must trade in a car first registered before August 1, 1999, which they have owned for at least a year. An old car must be presented for exchange with log book, valid tax, insurance and MoT documents (or be registered as off-road).

In the past month, according to latest Government figures, 35,000 new cars have been purchased under the scheme – a fifth of the total market.

Car buyers aren’t the only ones to benefit. Honda workers are back at work in Swindon after a four-month lay-off, and shares in Pendragon, one of Britain’s biggest car dealers, are back from the precipice – up from 1p to more than 20p.

Gareth Lane, car industry analyst at price comparison service Confused.com, says: “Although some dealers and manufacturers are asking questions about how VAT is calculated on reduced prices, the scheme is helping to get older vehicles off the road and persuading drivers to switch to safer, greener vehicles.

“Dealers also have scope to offer parallel schemes which persuade motorists to trade in older vehicles, which might be important if funding runs out.’’ Mr Lane says research suggests drivers using the scheme will choose smaller cars, meaning less carbon dioxide emissions and lower fuel consumption, and lower running costs as a result.

Automobile Association spokesman Luke Bosdet agrees: ‘‘The scheme means more vulnerable drivers on the road – younger drivers and old folk – will get better protection from new cars confirming to Euro-wide standards.

“A new small Fiat at £4,900 was unthinkable a few months ago.’’ Even the Government, it seems, could make a healthy profit if the scheme takes off: VAT payable on a £10,000 car is approximately £1,300, so 300,000 sales at that level would generate VAT receipts of £390m, against the £300m paid in subsidy.

But what are the drawbacks of the plan?

One problem is that new vehicles lose value at a rapid rate as soon as they leave the forecourt.

The Car Scrappage Scheme already stands accused of cutting the value of second-hand cars up to one year even faster than usual, with British Car Auctions blaming it for a £2,400 fall in prices achieved on “nearly new” vehicles in its April auction sale.

Mark Monteiro, insurance specialist at uSwitch.com, warns: “While a £2,000 incentive may be enticement to motorists, even this payout can’t hold its weight against the magnitude of vehicle depreciation.

‘‘When choosing a new vehicle, motorists should research the likely rate of depreciation, because some of the top-ten most popular vehicles hold value better than others.”