Cash for Clunkers Hitting the Brakes?

Fri, Jul 31, 2009

Cash for Clunkers out of money

It appears the Cash for Clunkers program is hitting the brakes just after a few days. Reportedly, the program has run out of money because of so many people trading in their clunkers for cash.

Here’s what the Wall Street Journal is reporting about Cash for Clunkers…

White House officials and lawmakers were studying late Thursday how to keep alive the government’s cash-for-clunkers incentive program because of concerns the program’s $1 billion budget may have been exhausted after just one week.

Obama administration officials warned congressional leaders Thursday it planned to suspend the program at midnight. But the White House released a statement late Thursday saying that completed deals would be honored and the program is still under review.

A White House official 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 [cash-for-clunker] transactions that have taken place to-date will be honored.”

But the program’s unexpected success also will put Congress and the Obama administration in a bind. With deficits soaring, lawmakers are increasingly reluctant to spend additional billions they don’t have.

On the other hand, they are sure to face a consumer and industry backlash if they end a popular program midstream, especially as dealerships across the country are in the middle of a huge advertising campaign to tout the program.

And here is what CNN Money is reporting about Cash for Clunkers…

This much seems certain about the Cash for Clunkers program: Consumers are happy to take government rebates to buy new cars.

The fate of the $1 billion trade-in program was up in the air over concerns that it may have already burned through its funds less than a week after it was officially launched.

It was unclear whether car buyers would be able Friday to trade in clunkers.

Congressional sources said early Thursday evening that the program would be put on hold. But Obama administration officials said later that Clunkers had not been suspended and that they were studying the situation.

“Auto dealers and consumers should have confidence that all valid … transactions that have taken place to date will be honored,” a White House official said in a statement.

An official at the Department of Transportation, which manages Cash for Clunkers, said the administration would try to work with Congress to find more funds to keep it going.

One of the program’s main champions in Congress, Sen. Debbie Stabenow, D-Mich., called on Congress to appropriate more money.

Stabenow said the effort has provided an important boost to the economy and resulted in 200,000 car sales.

“I am delighted to hear dealers say that all of their salespeople are busy and they are selling more cars in a day than they had been selling in a month,” Stabenow said.

What’s next and where will the money come from to keep this program going?

It doesn’t appear anyone is sure right now, but the pressure is definitely on the Obama administration to find a solution and quick. In the meantime, it seems dealers are no longer doing the deals out of fear the money will not be made available to them.

I wonder how much debt is associated with the 200,000 in car sales?

Tags: Cash for Clunkers, Economy, Government