'Clunkers' Program No Longer in Neutral

'Clunkers' Program No Longer in Neutral

Published August 7, 2009

Car shoppers caught up in the frenzy of the "cash-for-clunkers" program will have more time now and a $2 billion reason to trade in their old gas guzzlers.

The Senate voted to refill the popular car incentive program on Thursday, tripling the $1 billion fund that has led to big crowds at once deserted auto showrooms. President Barack Obama will sign the bill, extending the program into Labor Day and preventing the 2-week-old incentives from running out.

"Now more American consumers will have the chance to purchase newer, more fuel-efficient cars and the American economy will continue to get a much-needed boost," Obama said in a statement hailing the vote.

The extra money, approved by the House last week, is aimed at helping automakers and spurring the economy while removing the least fuel-efficient vehicles from the road. Last week, the government said the program was running out of money and the fund would be exhausted by Friday if it was not replenished.

Through late Tuesday, the most recent data available, more than $775 million of the original $1 billion had been spent, accounting for the sale of nearly 185,000 new vehicles. Administration officials estimate the new money will last into Labor Day and could prompt another 500,000 vehicle sales.

Dealers said the additional money would help them maintain a sales pace they haven't seen in months and continue to benefit from heavy publicity surrounding the rebates. Car dealers saw an uptick in sales in July, when Ford Motor Co. achieved its first year-over-year sales increase since November 2007.

"People are still coming in. It's like everyone out there has been given the green flag," said John Rogin, who runs a Buick dealership in Livonia, Mich.

Senate opponents of the program, most of them Republicans, question its effectiveness and cost. They contend the funding is leading the government to pick winners and losers and that many car buyers, stoked by speculation about the program last spring, simply held off buying until the incentives started in July.

"These buyers would have bought the cars anyway," said Sen. Richard Shelby, R-Ala., who opposed the plan.

Auto industry analyst Aaron Bragman of IHS Global Insight said it was unlikely that demand will remain as high as it is now. Many people who qualified have already bought cars and while the rebates are expected to boost total vehicle sales in 2009, Bragman predicted lower sales next year because many customers have already taken advantage of the incentives.

"You are not going to see a continuation of the frenzied sales pace," Bragman said. "I don't think they will use up that money any time soon."

Under the program, passenger car owners are eligible for a voucher worth $3,500 if they trade in a drivable vehicle that got a combined city/highway mileage of 18 miles per gallon or less when it was new for a new car getting at least 22 mpg. Vouchers of $4,500 are available for owners who trade in a passenger car that got 18 mpg or less combined for a model that gets at least 28 mpg. Owners of old SUVs, pickups and vans can take advantage of similar benefits. Dealers ensure the traded-in vehicles are crushed and shredded.

"The reality is this is a program that has been working," said Sen. Debbie Stabenow, D-Mich.

Automakers are planning for a boost in sales. Hyundai Motor Co. has added a day of production at its Montgomery, Ala., factory, while General Motors Co. and Ford are considering following suit.

"Consumer confidence is really what you need here," said Tom Stephens, GM's vice chairman of global product development. "It's hard for them if they don't know if they have a job or a for-sure paycheck to go out and make a major purchase, so I think this is kind of jump-starting some things."


AP Special Correspondent David Espo in Washington, AP Auto Writers Tom Krisher in Traverse City, Mich., and Dan Strumpf in New York and AP Business Writer Stephen Manning contributed to this report.


On the Net:

Car Allowance Rebate System: http://www.cars.gov/

Written by Associated Press


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