Under the scheme, people who scrap a car or commercial vehicle that is at least 10 years old and replace it with a new fuel-efficient vehicle are entitled to a rebate of 2000 euros ($2841).
The subsidy rises to 3000 euros ($4261) if the new vehicle seats more than five people.
The extension would be the third since the program launched in October 2012, bringing the total funding up to 295 million euros ($421 million).
The scrappage plan is already credited with slowing the decline of Spanish car sales. The country experienced a five per cent drop year-on-year to 386,400 cars sold in 2012, compared with a general 7 per cent sales drop in Europe.
The scheme provides that the Spanish government pays half the rebate and the carmakers pay the balance.