New car sales in the UK rose 2.4% year on year in July, the first gain since April 2008, as consumers took advantage of the government’s scrappage incentive plan.

Registrations rose to 157,149 units from 153,420 a year earlier, according to The Society of Motor Manufacturers and Traders (SMMT). Sales to private individuals rose by 33.4% to 77,911, offsetting an 18% drop in fleet sales.

Under the government scheme, for which automakers lobbied for months before the politicians acted, buyers are get a GBP2,000 (US$3,398) grant to trade in old cars for new ones. Half is paid by the government with the balance from manufacturers and dealers.

The GBP600m (US$994m) programme took effect in mid-May and will run to the end of February at the latest.

SMMT chief executive officer Paul Everitt said: “The impact of the scrappage scheme is clear and we are encouraged by the positive impact it has had but the industry still faces a long road to recovery.”

The SMMT said sales of cars sold under the incentive plan accounted for 21% of July’s registrations while 84,361 vehicles had been sold since its inception.

Sue Robinson, director of the Retail Motor Industry Federation (RMIF), representing new car dealers, said the scrappage scheme was having a positive effect on the whole market:

“Car dealers are reporting that the scheme is continuing to provide a halo effect for overall car sales, and is helping increase footfall into showrooms by general buyers as well as scrappage buyers.

“With fleets not in the market for new vehicles at present, it is private buyers taking advantage of the scrappage scheme that are leading the revival. However, for sales to return to consistently positive levels in the medium to long term, business and general consumer confidence must be encouraged as much as possible.”

Deloitte UK manufacturing analyst David Raistrick said: “July’s 2.4% rise in new car registrations is positive news for the automotive industry, reflecting growing confidence and the impact of the scrappage scheme. However the critical test for the industry will be when the new registration figures for September are released.

“The fact that scrappage accounted for 21% of July’s new car registrations demonstrates the enormous impact of the scheme. An overall increase of just over 3,700 units in July compared with last year, when 33,026 units are attributed to scrappage, again highlights this point. With this in mind the danger is that the industry could suffer another sudden downturn due to the scheme ending.

“I urge the government to reconsider its decision and extend the scrappage scheme. The UK car market needs ongoing incentive schemes such as scrappage to stimulate a further recovery. Concern has already been expressed in Europe where the German, Italian and French markets fear they will suffer from the cessation of their scrappage schemes. It is evident that the US market has been buoyed in the past fortnight with the announcement of their scrappage scheme.”

 UK sales have slumped in the past year with registrations down 550,000 units.