'Cash for clunkers' program headed for big expansion

McClatchy NewspapersJuly 31, 2009 

WASHINGTON — Congress and the Obama administration scrambled Friday to triple the size of the overwhelmingly popular "cash for clunkers" program after it appeared to be exhausting its $1 billion funding in its first week.

The House of Representatives voted 316-109 to put another $2 billion into the program, taking the money from a stimulus-backed Energy Department loan-guarantee fund. "Consumers have spoken with their wallets," said House Appropriations Committee Chairman David Obey, D-Wis.

Senators were to consider the extension next week before they leave for their August recess.

President Barack Obama said he supported extending the program, which gives consumers as much as $4,500 each to put toward fuel-efficient cars when they trade in gas guzzlers.

Obama said that this helped consumers, the environment and the auto industry while reducing U.S. dependence on foreign oil. The program aims to yield up to 250,000 trade-ins per $1 billion in federal assistance.

"Not more than a few weeks ago, there were skeptics who weren't sure that this cash-for-clunkers program would work," the president said. "I'm happy to report that it has succeeded well beyond our expectations and all expectations, and we're already seeing a dramatic increase in showroom traffic at local car dealers."

Marc Cannon, a spokesman for AutoNation, said the program had showrooms hopping at the company's 239 dealership locations in 15 states. AutoNation dealerships have sold 3,000 cars under the program and showroom traffic is up 36 percent.

"We're seeing a tremendous amount of interest," Cannon said. "It's like people have been given permission to shop for a car. It's a huge psychological boost."

Most buyers are either pre-qualified with credit, are paying cash or have credit union backing, Cannon said. Buyers with poor credit, however, are having a tough time because credit is still tight.

Amid the excitement, a vehicle finance advocacy group dubbed AWARE — Americans Well-informed on Automobile Retailing Economics — said that consumers shouldn't lose sight of getting the best financing deals they can. The group offers a budgeting calculator and advice on contracts and negotiations on its Web site .

The Federal Trade Commission, meanwhile, warned consumers to steer clear of bogus "cash for clunker" Web sites that ask for personal information, supposedly to register for the program. Such scams typically are used for identity theft and related crimes.

There's only one official government Web site for the program. The site doesn't ask for personal information. Consumers who find bogus "cash for clunkers" Web sites that seek personal information should notify the FTC at www.ftc.gov, or 1-877-FTC-HELP (1-877-382-4357).

Extending the program in its current form isn't without controversy.

Frustrated dealers have said that they find the regulations and voucher submission processes unclear, or that they haven't been reimbursed yet.

Some lawmakers don't like the idea of redirecting stimulus spending. Some business experts would prefer to see lower vouchers that covered more cars.

Some environmentalists think that the program should push buyers only into very fuel-efficient cars, although House Speaker Nancy Pelosi, D-Calif., said Friday that "the cars that have been purchased are much more fuel-efficient and the emissions standards are much better than the bill even required, and that is good news."

Consumer advocates worry that the lower-income drivers who could benefit most from the vouchers aren't qualifying to buy new cars, while some Republicans are critical of the government playing favorites with its aid to businesses or about yet more federal spending in light of the burgeoning federal budget deficit.

"I don't like the idea of spending money we don't have," said House Republican Conference Chairman Mike Pence of Indiana. "At the end of the day, we've got to get away from this gimmicky approach to economic stimulus. To encourage people to buy a car is like spending money for bailouts to car companies."

But Rep. Artur Davis, D-Ala., said that the auto industry still needed help, and that there was bipartisan consensus that this program was a good way to do that.

"A number of conservative Republicans in my district said they liked it," Davis said. "When I see conservative Republicans, who have been bashing everything that comes out of this administration, asking, 'Where's my cash-for-clunker money?' then I think this program must be good."

The U.S. Chamber of Commerce, a powerful business lobby, sent a letter to all senators urging them to vote for the expansion. "The 'cash for clunkers' program can provide an important environmental benefit while assisting an industry in crisis," said the letter, signed by R. Bruce Josten, an executive vice president at the chamber.

John McEleney, a multi-franchise dealer in Iowa and the chairman of the National Automobile Dealers Association, said Friday that "without question, the cash-for-clunkers program has been very successful in accomplishing its goal of boosting new car and truck sales."

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McClatchy Newspapers 2009

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