Chancellor Alistair Darling has confirmed that when a car more than 10 years old is scrapped, the government will offer a £2000 discount on a new car
The car scrappage scheme will take effect from next month.
The aim of the scheme is to encourage new car purchases and help support UK dealers and manufacturers.
There will be £300 million of funding put into the scheme, which will run from mid-May until March 2010, or until the government funding has been used.
The government will provide £1000, and the car industry will pay the other £1000. So, car manufacturers must sign up to be part of the scheme and they are not obliged to take part.
At present, Ford, Toyota, Volvo, Citroen and Hyundai have signalled their intention to sign up to the government's scrappage scheme.
Dealers of participating manufacturers will be required to do all the paperwork for the car buyer, and arrange for the old vehicle to be scrapped.
There are a few conditions to the car scrappage scheme. The old vehicle being scrapped must be a passenger car or small van up to 3.5 tonnes, registered in the UK on or before 31 July 1999, currently registered with the DVLA to a UK-domiciled registered keeper making the application or on a SORN notice, have a current MOT test certificate, and have been continuously registered to the owner for the 12 months preceeding the purchase.
The new vehicle must be a passenger car or small van up to 3.5 tonnes, first registered in the UK on or after the date the scrappage scheme is launched and be the first registration for the car, be a UK-specification car and registered to the same registered keeper as the vehicle being scrapped.
There will be no C02 restrictions on the new cars in order to help sales of cars from luxury manufacturers.