The government announced Thursday it was reviewing what has turned out to be a wildly popular "cash for clunkers" program amid concerns the $1 billion budget for rebates for new auto purchases may have been exhausted in only a week.
The Transportation Department called lawmakers' offices to alert them to the decision to suspend the program as early as today. The program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle.
A White House official said later that officials were assessing the situation facing the popular program but auto dealers and consumers should have confidence that transactions under the program that already have taken place would be honored.
A Transportation Department official said the department was working with Congress and the White House to keep the program going. The administration officials spoke on condition of anonymity because they were not authorized to speak publicly about the discussions.
Congress last month approved the Car Allowance Rebate System program to boost auto sales and remove some inefficient cars and trucks from the roads. The program kicked off last Friday and was heavily publicized by car companies and auto dealers.
Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting the suspension.
Before the halt was announced, Carson City auto dealers said Thursday the program was giving sales a badly needed boost.
"We've had traffic all month with people inquiring about the program," said Jeff Woodward of Carson's Nissan dealership. "We're seeing all kinds of cars."
Matthew Hohl, manager of Hohl Honda/Subaru in Carson City, said the program resulted in 11 new car sales since Monday.
"It's certainly a good shot in the arm," he said. "We've done a lot of business in the last five days."
Dana Whaley, manager of Carson Toyota, said they also have sold a number of cars.
"Since it started Monday, we've had a large increase in business."
Whaley said auto sales have been coming back slowly for the past few months.
"We've been seeing increases since May," he said.
He said he expected the program would give automotive sales the push they need to recover from the recession.
Woodward made a similar statement: "We may have hit bottom and are on the upturn at this point. This program is something that's going to help us in that direction."
Woodward said the program is complicated by the federal rules and requirements attached to it.
"There's a 164-page guideline," he said. "It's involved. There are a whole lot of conditions and qualifications that need to be met."
He said, however, most of those work in dealing with those requirements falls on the dealership, not the buyer.
The buyer never sees the rebate money. The amount buyers qualify for is simply deducted from the final purchase price and the dealership puts in a claim for the money with the federal government.
The program offers a $3,500 rebate for buying a new car if the new vehicle gets at least 4 mpg more than the trade-in. The rebate is $4,500 if the car gets at least 10 mpg more. For trucks, SUVs and minivans, the rebate is $3,500 if the mileage improvement is 2 mpg and $4,500 if the efficiency is at least 5 mpg better.
The trade-in can't be older than 25 years and the owner must have had it legally registered and insured for at least the past year to qualify. It must currently get 18 mph or less.
Congress approved the plan, funding it with $1 billion, earlier this year to not only stimulate the auto industry but get some of the oldest, most polluting vehicles off the road. Under the program rules, those vehicles traded in can't be resold.
Associated Press contributed to this report.
