New car sales recorded their biggest increase so far this year in October, helped by the scrappage scheme.
The Society of Motor Manufacturers and Traders (SMMT) said 168,942 new cars were registered last month, an increase of 31.6% compared with October 2008.
The SMMT said the "cash for bangers" incentive scheme had accounted for more than 20% of the new car sales.
Demand was also helped by customers wanting to avoid the VAT increase due in January, it said.
'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 Everett.
Buyers receive a £2,000 discount when they trade in a car more than 10 years old for a new one. The cost is shared between the government and the car industry.
Similar schemes have also been in place in France, Germany and the US.
Ford's Fiesta is the best selling model so far this year, followed by the Focus.
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.''
He added that purchasing power has been lifted by sharply reduced mortgage interest payments, lower utility bills and a moderation in inflation.