Car sales are expected to exceed 200,000 in 2007, when the Special Savings Incentive Accounts (SSIAs) mature.
New car registrations are in line to end this year at 150,000, but the motor industry is predicting the next big boom in sales to occur in 2006 and 2007.
Initial August figures suggest that car sales have just topped 140,000 for the year to date, up seven per cent on last year.
However, a significant gap remains between the number of cars registered with the Revenue Commissioners and those taxed and on the road. The gap between new cars registered and those taxed stands at just under 13,000 according to the Central Statistics Office (CSO).
Its statistics show that 121,082 cars were licensed up to the end of July. This compares with new car registrations of 134,014 for the same period, according to figures from the Society of the Irish Motor Industry (SIMI).
The CSO says that some of the discrepancy is due to tax "exempt" vehicles. These can be divided into four categories - state-owned; diplomatic; fire services; and disabled drivers.
Taxis also feature as registered new cars, but are taxed as small public service vehicles. The number of exempt vehicles listed by the CSO so far this year comes to 3,681.
The rest are what is known as pre-registered and often feature as demonstration models in garages. These are then sold as low mileage cars, with prices lower than new but slightly above the normal used price.
Several industry analysts suggest that a significant proportion of the "pre-registered" cars are a result of companies boosting sales figures to preserve market share, hoping to sell the cars on later in the year for a smaller margin. This practice is unlikely to be a feature of the industry in two years time, when importers and dealers hope to benefit from SSIA spending sprees.
With an average payout to SSIA holders estimated at €13,673, a report by Goodbody stockbrokers last week said that "in the consumption arena, the obvious big-ticket item, the car, is going to be a major draw on funds with over €1.1 billion forecast to reach the motor trade."
The Goodbody report estimates that €397 million will be spent on cars in 2006 while €741 million will be spent in 2007.
The SSIAs cost the Government €2.79 billion, but the Exchequer will recoup a substantial portion through tax receipts, including Vehicle Registration Tax (VRT). This may mean that the new Minister for Finance is unlikely to change the current scheme until after this spending period.
The SIMI remain determined on the issue. "Already the EU Commission has said it views the tax as a hindrance to free trade," says Cyril McHugh, SIMI chief executive. "It's a great chance for the new Minister to take more money back to the Exchequer by influencing the spending of the SSIA cash.
"Tax on car sales represents a very important Exchequer contributor and, if VRT is reduced, it will influence more car sales and in turn actually increase the proportion of the money recouped by the Government."
VRT adds between 22.5 per cent and 30 per cent on the price of a new car.
The EU Commissioner for the Internal Market, Frits Bolkenstein, is surveying motorists across Europe on car registration taxes. The online survey can be accessed via the SIMI website at www.simi.ie