Government To Suspend ‘Cash for Clunkers’ Program

0 has learned that the federal government will suspend the “cash for clunkers” program. Congressional officials said this evening the government plans to suspend the popular program amid concerns it could quickly use up the $1 billion in rebates for new car purchases. The Transportation Department called congressional offices late Thursday to alert them to the decision to halt the program, which offered owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle,┬áThe Associated Press reported.The congressional officials spoke on condition of anonymity because they were not authorized to speak publicly.

Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns of large backlogs in the system, prompting the suspension.

“There’s a significant backlog of ‘cash for clunkers’ deals that make us question how much funding is still available in the program,” said Bailey Wood, a spokesman for the dealers association.

The program was designed to be a shot in the arm for consumer confidence, but there were persistent questions about who would really benefit.

The government was hoping car buyers would finally start making deals for new rides, especially since taxpayers are now partial owners of several U.S. automakers under new bankruptcy agreements.

But while the government planned to put $1 billion into the program, it was still less than 250,000 clunkers traded in. Critics said that would leave a lot of consumers by the side of the road.

“The critical part of the plan, that’s the flaw. Even if you’re car does qualify, you may not be able to afford a new car payment,” CBS MoneyWatch Editor-at-Large Jill Schlesinger said. “And remember, you can only buy a new car.”

CBS 2 HD documented the example of Christie Acosta, who had just purchased a new car through the clunkers program.

“I had a 1997 Ford Explorer,” Acosta said. “We had it for a while, and I was ready to get rid of it.”

While it would only fetch about $2,500 from another buyer, the government gave her $3,500 Thursday to buy or lease a new Mazda under the Cash for Clunkers program.

Acosta said the best part was that her new car gets better gas mileage.

“It was definitely what made the deal for me,” Acosta said.

“It’s encouraging – as dealers, we certainly need it,” said Gary Flom, president of Manhattan Auto Group. “We’ve been hit very hard by this financial crisis.”

Among the other guidelines for the program: clunkers had to be no more than 25 years old and the old cars had to get 18 miles per gallon or less.

While dozens of cars were just disqualified, deals for government purchase made before July 24 still hold. The clunkers all get scrapped – a boon for the environment.

Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote in a letter to House leaders on Wednesday requesting additional funding for the program.

“This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn,” Miller said Thursday. “The federal government must come up with more money, immediately, to keep this program going.”

Brendan Daly, a spokesman for House Speaker Nancy Pelosi, D-Calif., said they would work with “the congressional sponsors and the administration to quickly review the results of the initiative.”

General Motors Co. spokesman Greg Martin said Thursday the automaker hopes “there’s a will and way to keep the CARS program going a little bit longer.”

{AP/CBS/ Newscenter}