Cars junked in Germany, where a scrappage program has boosted sales of new vehicles, the Canadian auto industry says. (Fabian Bimmer/Associated Press)

Auto dealers and car manufacturers want the federal government to immediately commit $350 million to a one-year program to subsidize purchases of new cars.

The industry proposed Friday expanding an existing environmental program to boost its sales. But "there are no plans at this time to expand the Retire Your Ride program," an Environment Canada spokesman said.

The dealers and manufacturers said Friday that the government should give consumers $3,500 towards the purchase of a new car if they trade in or scrap a vehicle that's more than 10 years old.

"The 3,500 new car dealers who are at the heart of nearly every community across Canada are struggling to survive this unprecedented economic downturn," said Richard Gauthier, president of the Canadian Automobile Dealers Association.

"A robust scrappage program could increase sales by as much as 100,000 units, which would be a significant benefit to consumers, dealers and their local economies," said Mark Nantais, president of the Canadian Vehicle Manufacturers' Association.

That would go a long way to replacing the 141,000 vehicle sales that disappeared in 2008, compared with 2007. But it would cost the federal government as much as $350 million.

At the moment, its four-year, $92-million Retire Your Ride program offers a "reward" of up to $300 to get older, higher polluting vehicles off the road. The reward may include discounts on public transit passes, bicycles, memberships in car-sharing programs or cash.

However, the industry said that money could be reallocated to its program, while some of the costs could be recouped through the additional estimated $125 million GST collected, and the $65 million estimated green levy, the tax on vehicles with poor fuel efficiency.

Gauthier said a similar program in Germany shows how it might work in Canada. Germany introduced a $3,800 per vehicle scrappage incentive, and new vehicle sales jumped sharply in April and May, he said.

A U.S. program will offer between $3,800 and nearly $5,000, the industry release said.

The existing federal program is aimed at older cars, because vehicles built before 1996 "produce about 19 times more air pollutants than newer cars and trucks," the government said in a news release earlier this year.

Nearly five million of the 20 million vehicles in Canada were built before 1996.