Trade-in plan: Clunker or bonanza?

WASHINGTON - As the government's $3 billion "cash for clunkers" program spurred an apparent last-minute car-buying frenzy across the nation yesterday, it remained unclear whether the rebate effort gave the ailing auto industry an important boost - or only a temporary reprieve.

Experts were sharply divided.

"The program worked beyond anyone's expectations. Look at how quickly the money was used up," said John Wolkonowicz, senior auto-industry analyst at IHS Global Insight, an economic-research firm in Lexington, Mass.

However, James Gattuso, a senior research fellow at the conservative Heritage Foundation in Washington, had a very different view.

"It was a bad idea," he said. "If you're looking for a long-term solution to the crisis in the auto industry, this wasn't it."

Car dealers across the country gave the program good reviews, but with a touch of concern.

"There is no doubt it has been successful," said Vicki Giles Fabre, executive vice president of the Washington State Auto Dealers Association.

Larry Carl, executive vice president of the Automobile Dealers Association of Greater Kansas City, Mo., also found both consumers and dealers benefiting.

However, he said that many dealers who fronted up to $4,500 in subsidies on trade-ins were worried that they might not get all of their reimbursement requests in by the deadline of 8 p.m. yesterday.

Many spent the day calling the offices of their senators and congressmen asking for an extension until the end of the week.

Dealers have until noon today to file paperwork needed to get repaid for the rebates.

Some dealers were worried that they may never get paid by the government, especially if the program exceeds its funding.

"Dealers have assumed a large amount of risk to participate in this program," Fabre said.

This much is clear: Since the program began about a month ago, it's logged more than 625,000 requests for rebates worth about $2.58 billion; a total of about 750,000 transactions are expected.

Consumers qualified for rebates of up to $4,500 if they traded in gas guzzlers for more fuel-efficient new cars.

Many lawmakers were concerned that people wouldn't buy cars that were efficient enough, but the federal Transportation Department estimates that gas mileage of new vehicles is up about 60 percent from the trade-ins.

The program's supporters probably outnumber its detractors. Muhammad Islam, an associate professor of economics at St. Louis University, thought cash- for-clunkers filled an important economic need.

"Overall it was a good idea, because that sector needed a boost," he said.

And IHS Global Insight found that although about two-thirds of sales were "pulled" from the future - that is, they attracted consumers who had planned to buy a car during the next 18 months - the effect on future sales should be slight.

Carmakers aren't likely to simply revert to old ways of selling cars, Wolkonowicz said, because the industry is likely to provide new incentives for buyers.