The Government's "bangers and cash" car-scrappage scheme has started with vehicle manufacturers hoping it will jump start the ailing motor industry.

The initiative allows owners of cars and small vans more than ten years old to get £2,000 off the price of a brand-new vehicle when scrapping their old motor.

The Government and manufacturers are sharing the cost of the scheme, which will last until the end of February 2010 or until the £300 million Government funding runs out.

Such schemes have worked well overseas, particularly in Germany where new car sales have shot up by 40 per cent.

The UK motor industry needs a similar boost as new car sales have fallen for 11 months in a row.

Sales for the first four months of this year are down 28.5 per cent compared with the January-April 2008 period and this had led to car companies cutting production and jobs.

Although the UK scheme is voluntary, all the major manufacturers have signed up for it and many are planning to continue their own sales incentives on top of the scrappage deal.

Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, said: "The scrappage scheme is good news for consumers and the UK motor industry alike. It has already started to get people back into showrooms to kick-start demand in the market.

"There has been a good response to the scheme ahead of the official start date and industry is confident that this will be translated into additional orders."

Last week price comparison company uSwitch.com said the £2,000 incentive would effectively be "lost" in depreciation within 88 days of consumers buying a new vehicle within the scheme.

But the AA, which is one of a number of organisations backing the scrappage initiative, said the depreciation analysis was irrelevant and misleading and that the scrappage scheme would benefit "hundreds and thousands of consumers".

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