The scheme has given carmakers a boost
The UK car scrappage scheme is to be extended for a further month.
It was due to finish in February, but the subsidy will now run until the end of March, although no extra funds will be provided.
The government said the extension would give manufacturers and dealers "more time to prepare for and operate the exit phase of the scheme".
Under the scheme, drivers of cars at least 10 years old get £2,000 off the price of a new vehicle.
Half of the money is paid by the government and half by the carmaker in question.
The government has put a total of £400m into the scheme, which started in May of last year, with a limit of 400,000 vehicles that can be scrapped.
According to the government, some 330,000 new cars have been ordered under the programme, which means 70,000 people will still be able to benefit.
"Against the background of the economic downturn the scrappage scheme has proved a great success, driving UK car sales, protecting jobs and supporting the supply chain for car manufacture at a time when this sector needed it most," said Business Secretary Lord Mandelson.
"If you're considering buying a new car, you should place your order as soon as possible to avoid disappointment, because the budget is strictly limited."
The UK car industry's main trade group, the Society of Motor Manufacturers (SMMT) has hailed the scrappage scheme as a success.
It estimated last month that the initiative was responsible for about a fifth of all new car registrations since its introduction.
However, the SMMT also said that UK car production fell 30.9% last year following the collapse in the global car market.
The US and German governments have run similar scrappage initiatives.