July 31, 2009 in Nation/World

No cash for clunkers

Billion-dollar federal rebate program runs out of money in less than a week
Jim Puzzanghera, Martin Zimmerman And Tiffany Hsu Los Angeles Times
Associated Press photo

A woman shops for a car Monday in Springfield, Vt. Above her is a car that was dumped in a trash bin as a visual promotion for the government cash for clunkers program.
(Full-size photo)

WASHINGTON – With surprising swiftness, the government’s cash for clunkers program has burned through its $1 billion budget in less than a week as car buyers swarmed dealerships, and federal officials were scrambling late Thursday night to find more money to keep it going.

The program, designed to jump-start car sales and improve the fuel efficiency of the nation’s auto fleet, unleashed a wave of pent-up demand that threatened to exhaust funds before dealers could be fully reimbursed for rebates under the plan.

As word got out Thursday that the program might be suspended at midnight, some car dealers reported a surge in nighttime buyers. But government officials later said the program – dubbed CARS for Car Allowance Rebate System – was not going to be suspended overnight.

“We are working tonight to assess the situation facing what is obviously an incredibly popular program,” the White House said. “Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored.”

Buyers rushed to dealerships before the money ran out. At Toyota of Hollywood in Los Angeles, general manager Don Mushin said he expected to sell 15 vehicles before closing Thursday.

“It’s a mad rush right now with people bringing in their clunkers,” he said. “The whole place is full.”

Car sales have been in the tank for more than a year as the nation’s deepening recession and growing ranks of unemployed turned the market into the worst one in decades and helped send General Motors Corp. and Chrysler into filing for bankruptcy protection this year.

The federal program provided rebates of $3,500 or $4,500 to consumers who traded in vehicles with combined city/highway mileage of 18 miles per gallon or less and bought more fuel-efficient new cars or trucks.

The program was designed to run until Nov. 1 or until 250,000 cars had been sold, whichever came first. Many analysts had expected the money to last at least until Labor Day.

So far the program has paid about $150 million to car dealers and reserved as much as $850 million more for pending applications, according to congressional aides. That brought the total dangerously close to the plan’s funding limit.

Dealers and automakers said the plan clearly sparked a level of interest that had been missing in new-car showrooms, which have looked like ghost towns for much of the last year.

Kevin Garrett, the general sales manager at Spokane Chrysler, said the program has been very popular at his dealership in Spokane Valley. His dealership sold about 10 new cars in the past two days.

“It’s been very exciting,” Garrett said.

He said his dealer and others in the region are working to make sure a complicated paperwork process is done right. Once the paperwork is certified, “that money is going to shrink real fast,” Garrett said. “I know of a lot of deals in limbo right now.”

Congress could appropriate more funding, but it’s unclear whether that will happen. Lawmakers authorized $4 billion, but appropriated only $1 billion for the program.

The main House sponsor of the legislation, Rep. Betty Sutton, D-Ohio, was working Thursday night with the White House, Transportation Secretary Ray LaHood and House leaders to find more money for the program, said Nichole Francis Reynolds, her chief of staff.

“It’s amazing and it’s improving our environment, it’s improving the economy and we look forward to continuing this great program,” Reynolds said, noting that there was “overwhelming support” for it but that finding a source for additional funds would be challenging.

Staff writer Sara Leaming contributed to this report.

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