Cash for Clunkers nearly out of cash

Drivers planning to wait until next month or even this weekend before trading in their gas-guzzler for a more fuel efficient model under the Cash for Clunkers program may have experienced heart palpitations yesterday upon hearing that, just a week after the program started, the U.S. Department of Transportation was planning to suspend it due to high demand.

  Cash for clunkers targets gas guzzlers.
  Photo by Andy on Flickr, CC license.

>>Update 8/4: Cash for Clunkers still making trades <<

The Car Allowance Rebate System (CARS), more commonly known as Cash for Clunkers, was created by the federal government in June to stimulate the economy and get the very least fuel efficient cars off the road. Owners of qualifying vehicles, those getting less than 18 miles to a gallon of gasoline, could get a federal credit of $3,500 or $4,500 to purchase a qualifying replacement vehicle. While the program has been criticized as too complicated, 23,000 dealers signed up to participate.

Only 40,000 applications for the vouchers have been processed but an estimated 200,000 more are waiting in a paperwork backlog, generating concerns that the program would exceed its $1 billion budget this week. On Thursday, news reports indicated that the Department of Transportation would suspend the program at midnight but the White House intervened and assured car buyers and dealers that qualifying vouchers would be honored. White House spokesperson Robert Gibbs told CNN that Cash for Clunkers will run at least through the weekend.

Friday afternoon, the U.S. House of Representatives authorized an additional $2 billion of funding and the Senate is expected to take up the issue next week before the beginning of the August Congressional Recess. But at the rate drivers are racing to trade in their gas-guzzlers, even that infusion of cash won't last long.

If you are running out this weekend to trade in your clunker, Gerri Willis of CNN Money has a number of tips for you including: "make sure you don't sign a waiver that forces YOU to pay the voucher if your deal doesn't go through. And, have the dealership wait to destroy your old car until they are absolutely sure that you are getting the voucher money."

There are a number of other resources for prospective buyers to figure out if they own qualifying car and whether a trade in makes financial sense, including an environmentally focused Cash for Clunkers guide to from the Sierra Club.