1m drivers face snub on car cash because Government 'doesn't have enough money' to meet demand for £2,000 trade-in

More than a million motorists hoping to take up the Government's £2,000 new car discount by trading in old vehicles could find that the cash has run out.

Alistair Darling announced the trade-in scheme for cars more than ten years old in last week's Budget, but the Government has capped its subsidy at £300million - a figure to be matched by car manufacturers.

That would enable only 300,000 motorists to take advantage of the scheme, but credit-scoring agency Experian estimates there could be demand from 1.5million car owners.

The Government has capped its subsidy for the replacement of old cars at £300m

The Government has capped its subsidy for the replacement of old cars at £300m

Although the success of similar schemes in France and Germany has led their governments to extend the offer, the Business Department ruled out a similar move once the cash has run out, whatever the level of demand. 'It's first come, first served,' said a spokesman.

Experts suggest the Government has massively underestimated the demand that will be unleashed by its plan, especially as car makers intend to add the £2,000 to existing marketing deals. In some cases owners-could get £5,000 off the price of a new car worth about £15,000.

The new car market in the UK, which saw just above two million vehicles sold in 2008, has collapsed in the teeth of the recession, tumbling 57 per cent last month compared with March last year, and the scrappage scheme is viewed as a lifeline for the industry.

The first analysis of potential demand for the scheme by Experian, which credit-scores motorists for car loans, suggests massive demand in line with similar moves on the Continent.

According to Experian, which analysed details of more than 34.7million cars from the DVLA, 7.1million privately owned used cars will be eligible for the scheme.

About 15 per cent of these are likely to be worth more than £2,000, so scrappage would not be a worthwhile option. And some owners would still buy secondhand, despite £2,000 towards the price of a new car. Experian calculated that about 1.5million owners of cars more than ten years old would have the money and the inclination to trade up.

A spokeswoman said: 'Our analysis shows very clearly that this number of car owners have the ability and are very likely to want to take part in the scheme.'

Even though the scrappage scheme does not come into play until the middle of next month, there is already evidence that demand will be heavy.

Ford said: 'We have already seen strong interest on our websites.'

Fiat said that although it was still early days, there was evidence of strong demand.