Car sales rose by nearly 30 per cent in January, as buyers hurried to benefit from the Government’s car scrappage scheme, which has been extended for an extra month.

The scheme, which began last May, was due to end in February or when funding ran out.

However, yesterday the Department for Business, Skills and Innovation (BSI) said it would allow buyers until the end of March to take advantage of the scheme, which offers consumers a £2,000 discount, half from the industry and half from the Government, to trade in vehicles that are more than ten years old.

According to BSI estimates, there is £70 million left of scheme funding. Lord Mandelson, the Business Secretary, said: “Against the background of the economic downturn the scrappage scheme has proved a great success, driving UK car sales, protecting jobs and supporting the supply chain for car manufacture at a time when this sector needed it most.

“If you’re considering buying a new car, you should place your order as soon as possible to avoid disappointment, because the budget is strictly limited.”

The Society of Motor Manufacturers and Traders (SMMT) said the scheme accounted for 17.8 per cent of sales in January — the seventh increase in a row — despite the return to 17.5 per cent in VAT at the beginning of the year.

Paul Everitt, the SMMT chief executive, said: “The 29.8 per cent increase in January new car registrations provides a better than expected start to 2010 for the UK motor industry.

“Scrappage continues to lift demand successfully and today’s announcement of a continuation of the scheme to the end of March will allow the maximum number of people to benefit from the budget that’s still available.”

However, the SMMT warned that the outlook for 2010 was still constrained, with demand expected to fall by nine per cent to 1.82 million units for whole of the year — the lowest level since 1993.

In 2009, car production fell by 31 per cent year-on-year, the SMMT reported last month.

Mr Everitt added: “Industry expects another difficult year with the availability of finance, consumer confidence and sustaining demand post-scrappage, key to performacnce in the second half of the year, but signs of recovery in the fleet and business sectors are enoucouraging.”

The most popular car in January was the Ford Fiesta – which was also the bestseller of 2009. Toyota, which is currently embroiled in controversy about its handling of a global recall following an accelerator defect in several of its models, did not appear in the top ten.

Source : The Times.