The UK government on Wednesday said it would introduce an incentive scheme to encourage owners of cars at least 10 years old to trade them in for a new model. The move was immediately welcomed by the Retail Motor Industry Federation (RMIF) which represents car dealers and service centres.

Chancellor (finance minister) Alastair Darling announced the measure in his annual Budget statement to Parliament. He said owners of old cars would be offered GBP2,000 to trade up to newer, lower polluting models. The "time limited" scheme would end next March, he added.

The deal:

  • A total of £2,000 will be offered in a "cash-for-scrap" scheme for 10-year-old, or older, cars
  • The GBP2,000 saving will be made up of GBP1,000 from the government and GBP1,000 from the relevant car manufacturer
  • Participation in the scrappage scheme by specific car manufacturers is voluntary
  • The funding will be made up of GBP300m from the government - which will be matched by manufacturers participating in the scheme
  • The scheme is expected to be introduced in mid-May
  • The scheme will run until the start of March 2010, or until all of the government funding has been used.
  • The discount will be offered to consumers buying a new vehicle to replace a vehicle which they have owned for more than 12 months
  • The registered keeper must have a UK address
  • Eligible vehicles must have been first registered in the UK on or before 31 July 1999 and have a current MOT test certificate
  • Scrappage savings apply to commercial vans (up to 3.5 tonnes) as well as cars
  • The scheme will be audited by the DVLA [the government's central driver and vehicle licensing agency]
  • Scrappage trade-ins can only be made against new cars

"The introduction of a vehicle scrappage scheme as announced in the budget will boost the new car market, encourage consumers to get back into car showrooms, and reduce the likelihood of [job cuts] in this sector,' RMIF chairman Paul Williams said.

"A number of other EU member states have boosted vehicle sales through scrappage schemes. A similar scheme has seen great success in Germany, where new car sales saw a 40% monthly rise and attracted over half a million buyers.

"By opting for a vehicle scrappage scheme, the government has taken the opportunity to boost the new car market, while simultaneously helping consumers buy a new car. The nation's car dealer network, which will be in the front line for the duration of the scheme, has the expertise that will enable the scheme to be a success, and will assist government in the implementation of the scheme."

The RMIF first called for such a scheme in November 2008, with support from the SMMT, which represents new car makers, importers and distributors.