Popular $1 billion 'cash for clunkers' program out of money

WASHINGTON — The government's $1 billion "cash for clunkers" program aimed at boosting stagnant auto sales is almost out of money, putting its future in question, sources said.

A Transportation Department official said late Thursday the department was working with Congress and the Obama administration to keep the program going. The administration official spoke on condition of anonymity.

Passed by Congress in late June to help the flagging U.S. auto industry, the program gives vouchers worth up to $4,500 to consumers who trade in gas-guzzling cars for more fuel-efficient models. The highly publicized effort was scheduled to run until Nov. 1, or until money ran out. It was not expected to run out of cash so quickly.

The Transportation Department had begun accepting applications 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, so there is a large backlog of applications.

Transportation Secretary Ray LaHood called lawmakers Thursday afternoon to warn them the program, formally called the Car Allowance Rebate System, or CARS, would be halted at midnight, congressional sources said. Several other sources in the administration and on Capitol Hill also said the effort faced a midnight suspension.

But later, administration officials said no suspension was planned and all valid transactions under the program would be honored. White House spokesman Robert Gibbs said the administration is "evaluating all options" to keep the program funded.

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

About 250,000 vehicles were sold under the program, which offered payments of $3,500 to $4,500 for people who traded in old cars for new ones that had higher fuel economy. The average payment worked out to about $4,000, and the total payout, about $1 billion, the amount allocated by Congress under the program.

The official Web site for the program, Cars.gov, however, still said Thursday that $779 million remained in its coffers.

Auto dealers said they've had an overwhelming response from consumers wanting to turn in their clunkers. Cars submitted under the program were to be junked, not resold. They had to be less than 25 years old, and have a fuel economy, as rated by the window sticker, of 18 miles per gallon or less.

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

"Clearly, this has been a very stimulative program that's got consumers back into the car market. It's our hope that possibly more funds can be made available," said Cody Lusk, president of the American International Automobile Dealers Association.

As word spread unofficially Thursday night, car dealers were plunged into confusion.

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 suspension meant or whether the deals they already had signed would be honored by the government. Some said they were notified by e-mail by fellow dealers.

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.

Material from The Associated Press is included in this report.