The Chancellor has attempted to kickstart the ailing motor industry by introducing a "cash for bangers" car-scrappage scheme in this year's Budget.
Anyone with a car registered before December 31 1999 will get a cash incentive of £2,000 to trade in their old vehicle for a brand new one.
A total of £1,000 will come from the Government and the remaining £1,000 from car companies, with participants being able to buy any new vehicle, including small vans, rather than just low-pollution models.
About £300 million has been put aside by the Government to fund the scheme, which is expected to come into effect as early as mid-May and will last until the grant runs out, thus enabling 300,000 consumers to benefit.
The AA immediately hailed the announcement and said drivers would be pleased with a "generous scheme".
But car companies had been hoping that the Government would foot the entire £2,000-per-vehicle bill, while environmental groups had reckoned that those participating would be limited to choosing only "green" cars.
AA president Edmund King said: "Drivers will be delighted that a generous scrappage scheme has been given the green light. The AA first raised this issue with Downing Street last September so are pleased that a scheme has finally been given the go-ahead.
"A £2,000 incentive from Government and manufacturers will help the economy, environment and employment. Cleaner, greener and safer cars will replace some of the older gross polluters. The pot of £300 million could benefit 300,000 drivers.
"In our recent poll of 17,481 drivers, 28% said that they would consider taking advantage of a Government incentive scheme to scrap older cars if one was available."
Mr King added: "White Van Man will also benefit from the 'cash for clunkers' scheme as it will cover vehicles up to 3.5 tons."
