‘Cash for Clunkers’

July 31, 2009
‘Cash for Clunkers’ Car-Rebate Plan Sells Out in Days
By MATTHEW L. WALD

WASHINGTON — New-car shoppers appear to have already snapped up all the $1 billion that Congress appropriated for the “cash for clunkers” program, leading the Transportation Department to tell auto dealers Thursday night to stop offering the rebates. But a White House official said the program had not been suspended, creating confusion about its status. The program offers $3,500 to $4,500 for people who trade in an old car for a new one with higher fuel economy. In a statement issued Thursday evening, Robert Gibbs, the White House press secretary, said: “We are working tonight to assess the situation facing what is obviously an incredibly popular program. Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored.”

The program, formally known as the Car Allowance Rebate System, was scheduled to be offered until Nov. 1, or as long as the money was available. But the program was so successful that it has exhausted all the money allocated within the first week. Dealers have submitted applications on behalf of consumers seeking rebates on about a quarter-million vehicles. The National Automobile Dealers Association surveyed its members in recent days and warned the Transportation Department on Thursday that it had a very large backlog of applications, said Bailey Wood, a spokesman for the association. Late in the day, the group said the Transportation Department had responded by telling it to stop taking applications at midnight. The government and the dealers were concerned that buyers would close trade-in deals to buy new cars assuming they had a big rebate coming only to discover later that money was not available.

The dealers’ group said late Thursday night that it had not heard about the White House policy reversing the decision. Mr. Wood said that his group would ask Congress and the White House to add money to the plan. Transportation Secretary Ray LaHood has already been making calls to members of Congress, telling them about the situation. The Michigan delegation was planning a meeting Friday morning to discuss the situation, a Congressional aide said. On Thursday evening, the government Web site describing the program, www.cars.gov, still showed a chart shaped like a fuel gauge that indicated $779 million was available for trade-ins of cars and light trucks. Earlier Thursday, the Transportation Department issued a news release that said that applications for fewer than 23,000 vehicles had been submitted as of Wednesday, with a rebate value of just under $100 million. The Transportation Department had begun accepting applications for the rebates on Monday, when rules putting the program in place took effect. But car dealers had been accumulating the applications since July 1, when Congress put the law into effect.

POLITICO Breaking News:
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The House has passed a $2 billion spending bill to save the “cash for clunkers” program, on a 316-109 vote.

For more information...http://www.politico.com
The program had two goals: aiding the ailing car industry and improving fuel economy of the vehicles on the road.

Cars submitted under the program were to be junked. They had to be less than 25 years old and have a fuel economy, as rated by the window sticker, of 18 miles a gallon or less.

The size of the rebate depended on the fuel economy of the replacement vehicle. Consumers were also supposed to receive the scrap value of their trade-ins.

From the dealers’ point of view, the program was a resounding success.

“Two hundred and fifty thousand vehicles in four weeks?” Mr. Wood said. “One word comes out of my mouth: Wow.”

As word spread unofficially on Thursday night, car dealers were suddenly unsure of what to tell would-be buyers.

A Ford dealership in Paramus, N.J., did not know of the apparent suspension until a reporter called seeking comment.

Other dealers said they had no idea what the status of the program was, or whether the deals that they had already signed would be honored by the government. Some said they were notified by e-mail message by fellow dealers.

The dealers’ association, however, had been warning that the money would go quickly.

Under the program, a buyer who picked a car with a mileage improvement of more than four miles per gallon but less than 10 were eligible for $3,500; a buyer whose new vehicle was rated 10 miles per gallon or better than the old one was eligible for $4,500.

Until the cash-for-clunkers program began, the auto industry had been on track for annual sales of about 10 million units, down from the peak of about 16 million units a year.

Katharine Q. Seelye contributed reporting from New York.