Congress Passes $2 Billion Extension of 'Cash for Clunkers' Program

The Senate votes, ensuring popular but cash-strapped program will continue.

Aug. 6, 2009 -- Senators voted 60 to 37 tonight to give the "Cash for Clunkers" program an emergency $2 billion refill.

The vote on Capitol Hill saves the program, which gives car buyers between $3,500 and $4,500 to trade in their older cars, trucks and SUVs for newer, more fuel-efficient ones. The old cars have to be destroyed.

The program, officially called "CARS," was originally slipped into a war funding bill and given $1 billion to last from the summer into November. But it was so popular with car buyers that it was exhausted in two weeks.

The bill to save the clunkers program withstood six amendments on a variety of issues. Any of them would have killed the program for the summer. The House had passed the emergency refill before its members left town last week.

Proponents said the program helped the environment and stimulated the economy. Opponents said it was a bailout the taxpayers can ill afford.

While a boost for car dealerships, some lawmakers have argued that it is not helping U.S. automakers specifically. Six of the top 10 selling cars under the program are made by foreign manufacturers.

But administration officials insisted that the program is much needed for the floundering auto industry.

"Our CARS trade-in program has been a lifeline to the American auto industry by boosting the manufacturers, keeping dealerships in business, saving the workers' jobs and helping Americans buy cars," Department of Transportation Secretary Ray LaHood wrote on his blog. "There's no doubt in my mind that this program has been a wild success."

Cash for Clunkers a Boost to the Economy?

DOT estimates that the program has generated more than 184,000 transactions worth $775.2 million. But many more transactions remain in the pipeline, not yet claimed.

Auto sales have exploded, thanks to the incentives. reports that at the current sales pace, if sustained for the entire year, 19.6 million vehicles would be sold, beating the record of 17.4 million sold several years ago. also estimated that people trading in their wrecks were benefiting financially as well. It estimated that the average value of the clunkers was $1,475. The program awards buyers vouchers worth $3,500 or $4,500 for each qualifying car traded in.

Last week, House members supportive of the program touted its benefits to the economy, a sentiment echoed by LaHood this week.

"This is the one stimulus program that I believe as has been the most popular because the money gets out quickly," LaHood said. "The car purchaser gets the money in the form of a rebate, the car dealer sells automobiles, car salesmen are flooded with people trying to buy automobiles and so, this is an extraordinary way to really give a boost to our economy."

But some Republicans complained that the temporary boost for the economy doesn't mean the money is being well spent.

"It's still a horrible policy," Sen. Jim DeMint, R-S.C. said in a CNBC interview today. "There's always unintended consequences that we get into here when we think we can plan the whole economy. It's going to do a lot more harm than good."

Other critics questioned the government's help to the auto industry.

"Why not $4,500 for refrigerators or other businesses around my state?" asked Sen. Claire McCaskill, D-Mo. "So I just think that we have to be careful that we don't go too far with this program."

Some Republicans said the government needs to stay out of the sector altogether.

"The federal government should not be running the used car business. This is a horrible policy idea," DeMint told ABC News. "And the fact that people buy cars when you give them free money does not mean that is what the federal government should be doing."

Sen. John McCain, R-Ariz., argued the program is a boondoggle and amounts to another bailout of the auto industry.

The White House says taxpayers will not have to foot the $2 billion bill because it will come out of the stimulus budget.

Getting Cash for Your Clunker

Thanks to the Cash for Clunkers program, 39 percent of trade-ins qualify as clunkers, compared to 9 percent prior to the program, according to

The program was supposed to run until Nov. 1 or when the money ran out, whichever came first, but it was so widely popular that funds ran out within a week of its initiation.

Americans can get a rebate ranging from $3,500 to $4,500 if their car meets the requirements. Some of the key facts to know are:

- Trade-in vehicles have to provide 18 miles per gallon or less to be eligible, but some trucks and cargo vans have different requirements.

- Cars have to be less than 25 years old on the date it is traded in.

- People trading in their clunker have to buy or lease a new vehicle.

- The vehicle must be insured and registered for the full year preceding the trade-in.

- The cars being traded in cannot be resold or restocked and have to be scrapped.

Six of the cars in the top 10 list are by foreign manufacturers, including Toyota, Honda and Hyundai.

ABC News' Charles Herman contributed to this report.