Business secretary Lord Mandelson has been urged to fund the car scrappage scheme until the spring.
The Society of Motor Manufacturers and Traders (SMMT) says the incentive scheme has helped boost consumer spending and secure UK jobs in the motor industry.
End of scrappage and VAT increase on horizon
'Consumer confidence is still weak and recovery remains extremely fragile,' said SMMT chief executive Paul Everitt.
'The SMMT is calling on the Government to extend the scrappage incentive scheme through to the original close date of the end of February 2010, to counter the likely negative impacts of a return to the higher rate of VAT and the introduction of the first-year VED rates.'
It is understood that Lord Mandelson met with representatives of the motor industry today (Friday).
How the scrappage scheme works
In May, 300 million was set aside for the scheme, which promised 1000 from the Government towards the price of a new car, if the car manufacturer matched that with a further 1000.
The scheme was eligible to car buyers who had a 10-year-old car to trade-in.
Scrappage was scheduled to run until the end of February 2010 or until the money ran out. However, it has proved so popular, that the cash is set to run out before the end of the year.
Scrappage scheme facts to date
•Over 100,000 new vehicles have been registered under the scrappage scheme with an order book of a further 100,000 suggesting the scheme will run out of funding in late October/early November.
•One fifth of the cars registered were either built in the UK or have an engine produced here.
•The scrappage scheme is largely self-funding, with the 15% VAT paid on a car bought for 7650 covering the 1,000 Government contribution.
•76% of cars bought under the scrappage are superminis.
•Ford, whose engine plants in Bridgend and Dagenham employ 4000 people, has introduced extra shifts triggered by the increase in demand from UK and European scrappage schemes. August output was up 36.5% at Dagenham and 18.3% at Bridgend compared with 2008. Ford estimates that this has resulted in a positive knock-on effect for around 100,000 of their UK jobs in the sales, distribution and supply chain.
•Nissan has said that production of the UK-built Micra and Note has increased by an additional 33,000 units due to scrappage.
•In August and September, Toyota cancelled workshare to fulfil orders created by the UK and European scrappage schemes. Toyota plans to return to the workshare arrangements in October.