Popular “Cash for Clunkers” Program May Be Refueled With Additional Funds
By: Karen Hall
07/31/2009

Friday, July 31, 2009 - The House voted today (316 to 109) to add $2 billion to the government’s “Cash for Clunkers” program so that it could continue. The program’s initial allowance of $1 billion has been almost wholly depleted in only one week. The additional $2 billion would be transferred from the $787 billion economic stimulus plan. The Senate will not deliberate on an extension until next week.

The clunkers program, officially known as the Car Allowance Rebate System (CARS), enables consumers to receive a $3,500 or $4,500 rebate when they trade in an older car or truck for a more fuel-efficient, environmentally friendly model. The amount of the rebate depends, among other things, on the degree of improvement of miles per gallon. The program was set to continue until November 1, 2009, or when the funds run out, whichever came first.

The National Highway Traffic Safety Administration is in charge of the CARS rebates. They have processed $250 million in vouchers as of this morning. About 40,000 purchases through the program have been completed, and roughly 200,000 applications are waiting to be screened. The NHTSA is currently doubling the number of people reviewing voucher applications to keep up with the inundation.

In spite of assurances from the Obama administration that all clunker deals closed today will be fulfilled, there are concerns that the funding issues could result in dealers not getting compensated for rebates they offer their customers today. John McEleny, chairman of the National Auto Dealers Association, frets, “Until further definitive guidance of the availability of funding is provided by the Administration, dealers…may face a risk that they will not be reimbursed.”

AutoNation, the largest car dealership chain in the country, has sold over 3,000 cars and trucks this week via CARS, and traffic in its franchises increased 36% during that time period. As of Wednesday, about $96 million had been spent nationwide on vehicles purchased through the clunkers program.

It would seem, then, that CARS has been quite successful; the goals of the program were to stimulate the economy, put newer, “greener” cars on the road, and increase auto sales. This success could continue and increase if the program receives the additional funding. Said Republican Representative Fred Upton of Michigan, "I can think of no better use for unspent stimulus dollars that are gathering dust than financing 'Cash for Clunkers.'”