The Scrappage Scheme - how it works

The Government's car scrappage scheme was announced in the Budget and formally launched in May. Consumers receive a £2000 cheque if they trade in a vehicle registered before 31 August 1999 for a new car or van.

They are encouraged to replace their old banger with a smaller, fuel-efficient car. Funding for the scheme comes half from the Government and half from motor manufacturers.

The Government has set aside £300 million, which would fund 300,000 deals. By last week, 155,000 old cars had been traded in. Lord Mandelson hailed the scheme a great success, saying it had contributed to a 13.5% rise in car manufacturing.

Car sales rose 2.4% in July – the first monthly rise since April 2008. Almost one-fifth of orders under the scrappage scheme have come in the South East.