Cash for clunkers: Senate approves $2 billion extension

The Senate acted Thursday night to extend the Car Allowance Rebate System (CARS) program that has drawn about 200,000 people to buy new cars in the past two weeks. A strong supporter of CARS, President Obama is expected to swiftly sign the bill into law. (Learn about the CARS program in our "cash for clunkers" special section.)

Popularly known as "cash for clunkers," the program was threatening to run out of funds, causing uncertainty for consumers and dealers. Response has been overwhelming, creating a massive sales rush that brought the beleagured auto industry some much-needed good news and capital. (Read: "Cash for clunkers: Most popular clunkers, new cars.")

Last Friday, before Representatives left for a month-long summer recess, the House passed a bill allocating $2 billion in additional funding for the measure. This put pressure on the Senate to match the bill before leaving for its summer recess. Any modification would have required a conference with the House, and thus resulted in suspension of the program until Congress returns after Labor Day.

The additional $2 billion is earmarked to come from Department of Energy loans meant for development of advanced battery technology. House leaders said they plan to repay the DOE money.

Transportation Secretary Ray LaHood said he expects the new funds to last through Labor Day.

The initial program, officially called the Car Allowance Rebate System (CARS), was a success by almost any measure, boosting sales of fuel efficient new cars, getting older gas-guzzlers off the road, and clearing dealer lots of excess inventory. Almost 70 percent of the trades qualified for the higher CARS rebate, meaning they achieved significant fuel savings.

As the program continues, however, many dealerships have run out of the most popular and fuel-efficient new cars, so more trades may result in lower fuel economy improvements, smaller rebates, and potentially a less dramatic sales rate than what was credited to the program in its first weeks.

For now, consumers can take heart that they still have time to take advantage of the "clunkers" program and that transactions they've already planned can proceed. For those still considering trading in a clunker, dealers run out of the best new cars and it may be some time before the 2010s start to arrive.

Be sure to do your research and focus on the best cars, rather than compromise to get a deal. No financial incentive is worth buying an unreliable or poor-performing car that you'll likely have to live with for many years to come.

—Eric Evarts

Also read:
Cash for clunkers: Recommended cars that qualify for a voucher
Cash for clunkers: The best gas guzzlers to junk
Cash for clunkers: Compare the fuel savings
Cash for clunkers: Fuel and owner costs
Cash for clunkers bill cuts fuel consumption–running the numbers