Motorists are being offered £2,000 towards a new car or van if they trade in their 10-year-old, or older, vehicle for scrap under plans unveiled by the Government in last week's Budget.

The UK scheme, with £300m from Government and matched funding from industry, is intended to provide immediate support on a short-term basis to boost the car industry and its supply chain in the wake of falling sales.

A statement from the department for business, enterprise and regulatory reform (BERR) said: "It will also get older vehicles off the road and encourage consumers to invest in new, safer, and potentially more environmentally friendly models."

Business Secretary Lord Mandelson said: "This is targeted action with a capped budget and for a limited time, designed to boost the whole motor trade. This will ensure that the benefits of a scrappage scheme are balanced with the needs of other sectors of the car industry such as the second hand market, maintenance and repair businesses, and other industries that produce consumer durables or on the taxpayer."

Opposition to the scheme has been plentiful in both aftermarket and national press.In an article by Ali Hussain in the Sunday Times, it said that scheme may be thwarted by manufacturers as they are "likely to raise list prices" in an attempt to "offset the benefit of the scheme."

In the same article, Adrian Rushmore of Eurotax Glass's car price guide said the scheme would result in "used cars – especially those at the cheaper end of the market – will get more expensive." This is based on the idea of a seller looking to sell his older vehicle for £500 can now trade it in a their local dealer and get £2000.

Scrappage scheme Key points

1. The £2,000 grant is made up of £1,000 from government with matched funding from industry. The scheme w