Senate to vote Thursday on adding to clunkers program

DETROIT -- As the Senate prepares to extend the cash-for-clunkers program that some in the auto industry say could drive a recovery in their business, others already worry that demand will fizzle as the pool of eligible buyers shrinks.

The Senate is scheduled to vote Thursday on putting another $2 billion into the program. Majority Leader Harry Reid, D-Nev., said he has enough votes to pass the bill, following lengthy negotiations with lawmakers from both parties. That would allow consumers to get rebates of up to $4,500 until Labor Day.

But there's money left from the first $1 billion, despite warnings that it would run out by now. The government said Wednesday that about $775 million of the $1 billion allocated to the Car Allowance Rebate System, or CARS, has been spent, and applications for 185,000 rebates have been processed.

About 5 million potential buyers are out there eligible to trade in their "clunkers" for more fuel-efficient cars, says Mark LaNeve, vice president of North American sales, service and marketing for General Motors. But not all of those people can afford to buy a new car. Demand will start to slow, he says, even if the additional money is approved.

"I think it will take two, three, maybe even four months to run through this money," he says.

And there's the problem of diminishing supply: Many dealers say they're out of the models that are eligible for the program. John Schenden, owner of Pro Chrysler-Jeep in Denver, says the initial rush has died down, and he doesn't expect to see the same level of showroom traffic even if the Senate votes to expand the program.

"We sold what we could sell, and now inventories are so depleted, there's not much left," he says, noting his dealership has a few Chrysler PT Cruisers and some minivans left on the lot that qualify. "That's going to be a big issue for a lot of dealers."

The fact that only a small number of buyers qualify for the CARS program has prompted three big chains with dealerships in New York, California, Ohio, Georgia and Florida to offer their own incentives, open to buyers with 2006 model or older cars who trade up to any more-fuel-efficient vehicle. "We want to make it easy for people to qualify," says Brian Benstock, general manager of Paragon Honda and Acura in Queens, N.Y. Paragon will offer $500 to $4,500 in rebates.