New car sales recorded their biggest increase for the year in October, helped by the scrappage incentive scheme.
 
With similar schemes also in place in France, Germany, and the US, new car buyers receive a £2,000 discount when they trade in a car more than 10 years old, with the cost being shared between the government and the car industry.
 
The Society of Motor Manufacturers and Traders (SMMT) said ┬áthe ÔÇ£cash for bangersÔÇØ incentive scheme had accounted for more than 20 percent of the new car sales, as 168,942 new cars were registered last month, an increase of 31.6 percent compared with October 2008.
 
''Encouragingly, there has also been an increase in demand in the fleet and business sectors, which will be critical in sustaining recovery next year,'' said SMMT chief executive Paul Everitt.
 
Howard Archer from Global Insight says the increase ''may also be a sign that a significant number of consumers have greater scope and willingness to step up their discretionary spending,'' and that purchasing power has been lifted by sharply reduced mortgage interest payments, lower utility bills and a moderation in inflation.
 
Ford's Fiesta is the best selling model so far this year, followed by the Focus.
 
A spokesman for the RAC said, ÔÇ£While the figures are encouraging, we shouldnÔÇÖt get too carried away just yet. The acid test will be how sales react when VAT [value added tax] goes back up and the scrappage scheme ends.
 
ÔÇ£The real worry is that car sales will dip once again once the crutch of financial incentives are removed.ÔÇØ
 
Demand for new cars is still lower than last year. Over the first ten months of 2009, demand is down 12.3 percent or 236,790 units. Growth is expected to continue in the final two months of the year, ending 2009 at 1.9 million new units sold.
