Out with the old, in with the new

THE beginning of the new year means the government’s cash-for-clunkers programme that was announced in Budget 2026 officially takes off.

Under the programme, the government will offer a matching grant of up to RM4,000 to vehicle owners with vehicles aged more than 20 years to voluntarily trade in their vehicles for new makes from national carmakers Perusahaan Otomobil Kedua Sdn Bhd (Perodua) and Proton Holdings Bhd.

The move aims to offer an opportunity for some vehicle owners to improve their mobility options, not to mention safety, while promoting environmental sustainability as well as providing some support to the country’s national car brands with the offer.

The scrapped vehicles will, in a way, support the development of a vehicle end-of-life policy, which was supposed to be announced in 2025.

Early assessments have suggested the current cash-for-clunkers programme could account for 5% of total industry volume in 2026, which is estimated at about 770,000 units.

The forecast on acceptance numbers is probably based on a 2009 voluntary scrapping programme involving the national makes, which was reported to have seen 31,000 vehicles being scrapped.

As it stands, there are some 30 million registered vehicles in Malaysia with about 20% of those likely over 20 years of age. How many of these owners take up the offer could very much depend on how much the Proton or Perodua dealers offer.

Under the current programme, an old car valued at RM3,000 by the national car makers will see the government matching that amount, so in total, the car owner will get about RM6,000 as downpayment for a new Perodua or Proton.

Tough market

On paper, however, getting a decent price for a 20-year-old car will be quite challenging, as the second-hand car prices are already depressed.

With buyers unable to get bank financing for old cars, cash deals have depressed prices and now with changes proposed to the rule of 78 on loans, it’s even likely to become a tougher market for such cars.

Moreover, someone with a roadworthy 25-year-old continental make like a Peugeot or Fiat offered a token RM300 will very likely prefer to hold on to the car despite the difficulty of getting spare parts and cost parts prices.

Many people who own old cars in the country probably do so because of necessity, as they can’t afford a new car due to income level issues and the prices of new cars. So, how successful the cash-for-clunkers programme will be could depend on trying to narrow the expectations of owners with the reality of the offer by dealers and probably some fine-tuning of the programme.

Incentives galore

Since the government is willing to match the dealer’s offer by up to RM4,000, it could also fine-tune its offer by offering a minimum RM2,000 or RM3,000 to any trade-in so that the total amount the owner gets is higher – say at least RM4,000, which works out to about 10% of the price for an entry-level new Proton Saga or Perodua Bezza.

Proton and Perodua could offer incentives such as price discounts to beef up their offers and rise to RM1,000 or RM2,000 at least.

It’s likely doable much like Proton’s recently ended trade-in scheme, Proton Xchange Programme, that ran from May

to December of last year, which offered RM2,000 overtrade support for trading in old vehicles (15-plus years or unroadworthy) for any new Proton model, plus a first-year road tax exemption.

The cash-for-clunkers programme when compared with similar programmes abroad is fairly modest. China, for instance, has revised its cash-for-clunkers scheme for 2026, where buyers of eligible electric and hybrid vehicles can receive a 12% rebate capped at 20,000 yuan.

Car owners trading in an older car for a more fuel-efficient gasoline vehicle or upgrading to a newer electric vehicle would get a rebate of between 6% and 10%, up to a maximum of 15,000 yuan.

The offer rates in Western countries are generally higher.

The Malaysian government’s outlay for the cash-for-clunkers programme can be earned back to some extent from the exercise duty and sales tax from the new sales as a result of the programme.

From the owner’s perspective, cars are the second big-ticket item after housing in the country which many from the M40 category and below probably transact ever so carefully due to affordability concerns. An attractive offer could tempt them.

More importantly, a new car could improve the mobility experience for many, not to mention offer a new economic opportunity in the e-hailing sector to some that their old car just could not.