By the time Ibrahim Khaled Mohammed turned to a car dealer looking for an offer, his 1983 Volkswagen Passat could barely move.

But here in the Iraqi capital, the bald tires, balky engine and three decades of wear weren't much of a problem. What the buyer really wanted was the old white license plate, a commodity far more valuable than the rusting clunker itself.

The dealer paid Mohammed $3,800, counted out in U.S. hundred-dollar bills.

"Without the plate, it wouldn't have been worth more than $500," Mohammed said.

Demand for new cars is soaring in Iraq as salaries rise and the level of violence creeps lower. That is good news for automakers such as General Motors Co. and Kia Motors Corp., which are reporting a big jump in sales here.

The boom is proving lucrative too for dealers of recycled license plates, who profit from a quintessentially Iraqi conundrum: In many cases, the government will not issue new plates on vehicles bought from private dealerships.

As a result, many new car buyers pay middlemen for plates salvaged from old vehicles. That can add thousands of dollars to the price of a new car — effectively imposing a tax on first-time buyers that ends up in the hands of savvy businessmen rather than government coffers.

"Go to a car dealer, and they'll say: Do you want it with a plate or without?" said Ibrahim Jamil, a businessman who occasionally deals in cars. "If you have the money, you can find a plate."

Prices for popular Baghdad tags have skyrocketed past $4000, up from just a few hundred dollars in 2005, according to Jamil and others in the trade. Those looking for plates often turn to extended family or friends, and even knock on the doors of strangers with a broken-down jalopy parked outside, hoping they'd be willing to sell the tags.

Because Iraqi plates include the name of the province, those from ethically and religiously mixed regions like the capital are more valuable than ones from areas where one sect predominates. The cheapest plates, dealers say, come from Anbar, Diyala and Salahuddin — provinces where Iraq's minority Sunnis are concentrated.

"If you're a Shiite living in a Shiite neighborhood, you won't buy a plate from Ramadi," the capital of Anbar, said plate dealer Khaled Diwan. "You'd be too afraid."

He estimates he makes $500 on each plate he sells. For around $4,500, he can find you a plate and take care of the paperwork of changing the plate's registration to the new car owner. The real value, though, is getting enough plates to have ready-installed on the new Hyundais and Kias he sells out of a friend's dealership.

"A car with a plate already on it (is) much easier to sell," he said.

A surge in new car sales is driving up demand.

General Motors says it sold 32,000 vehicles in Iraq last year. That is up from 19,000 in 2010 and fewer than 1,500 just five years ago.

Iraq recently became GM's second biggest regional market after Saudi Arabia, said John Stadwick, the company's Mideast president and managing director. Business is so good that GM is building a fancy new showroom that Stadwick predicts "will probably be the nicest building in Baghdad" when it opens later this year.

Ford and Chrysler are reporting gains too. So are European and Asian automakers. South Korea's Kia sold more than 9,000 vehicles in the first three months of this year, up 47 percent over the same period a year ago, according to spokesman Michael Choo.

But the plates problem is a brake slowing sales, say those in the industry. "Especially for small cars," said Mohammed Khadr, the sales and marketing manager for GM's distributor. "A guy who's buying a $10,000 vehicle still has to pay $5000 for the plate. ... That's a 50 percent increase."

Hassan al-Kaabi, the Baghdad-based sales manager for Volkswagen and Audi, said he has an employee who specializes in finding plates for customers.

"The buyer doesn't have the time, so we do it for them. It's just another service we provide," he said during an interview in a new reinforced glass showroom in Baghdad's bustling Karrada neighborhood. The service doesn't come free, though. "Of course they complain about the prices," he said.

The government does issue new plates in some cases.

One is if you buy a new car from the state-run dealer or through infrequent government auctions. But many customers bypass the government offerings because the selection and add-on options are limited, and it can take months before popular models become available.

New plates are also available under a government program aimed at getting the large number of aging clunkers off the road — the legacy of a flood of used cars that poured into Iraq following the 2003 U.S.-led invasion. Those cars received black temporary plates issued amid the chaos after Saddam Hussein's fall. So owners of a temporary-plated car above a certain age can bring it to a state junkyard and walk away with a new, white plate to put on a new car — though after paying what might add up to hefty back fees.

Brig. Najim Abdul-Jaber, spokesman for the Traffic Police Directorate, defends the limits on new plates as a way to limit congestion and remove aging vehicles. He has little sympathy for Iraqis who complain the unregulated plate market drives up prices.

"The people who buy new cars don't care. They're happy to pay that much to show off their new cars," he said.

Khadr, from the GM distributor, argues that the number of old cars has thinned, and it's time for a straightforward registration system "like anywhere in the world.

"More people would be willing to buy new cars if you didn't have this system," agreed Diwan, the Hyundai and Kia salesman. "It makes things difficult."


Associated Press writer Sameer N. Yacoub contributed reporting.