VW is offering dealers €928 (£616) for used cars accepted in part exchange for a new Golf. It said the move would give dealers extra "room for manoeuvre" in making the model attractive to customers. The latest offer in Germany, which starts this week and is scheduled to last three months, follows an earlier offer of free air conditioning.
The launch of the new Golf - which accounts for up to about 15% of VW's sales but a larger share of its profits - is crucial to the group's plans to improve results this year.
But like other manufacturers, VW has been hit by the recent downturn in the German car market. Figures from the VDA German automotive manufacturers' association showed new registrations in May were 8% lower than in the same month last year.
VW sales dipped 2% in May versus a 1.2% decline in the western European market, despite what analysts viewed as a positive trend in Golf sales, with the Passat and Audi A4 lagging behind.
The Golf also faces tough competition from Opel's new Astra and from the new Ford Focus, expected to be launched later this year.
In addition, BMW is launching its new small 1-series car range this week, although VW insisted there was "no connection" between the BMW promotion and its new Golf price incentive scheme.
Although internal forecasts for sales of the Golf have been reduced, VW repeated yesterday its goal of selling 600,000 of the new model world-wide this year.