The popular Cash for Clunkers program generated nearly 700,000 new car sales during the past month, giving the U.S. auto industry a badly needed jolt of activity during the deepest decline in auto sales in two decades.
The government, releasing final data on the car incentives, said Wednesday that dealers submitted 690,114 sales totaling $2.88 billion, bringing the program to a close under its $3 billion budget. Japanese auto manufacturers led American companies in new car sales through the program, which ended late Monday.
Many dealers are still waiting to be repaid for the Cash for Clunkers incentives they gave car buyers and were allowed to submit paperwork seeking reimbursement until late Tuesday.
Despite the summertime frenzy at dealerships, analysts said the growth in auto sales may be short-lived. Sales in July rose to 11.2 million when converted to an annual rate, the first month in 2009 in which sales had risen above the 10 million level. A drop in consumer confidence late last year sent sales plunging to depths not seen since the early 1980s, prompting lawmakers to create the program.
Jeremy Anwyl, CEO of the auto Web site Edmunds.com, said dealers and automakers clearly gained from the big boost in sales. But while the incentives helped consumers, average prices for vehicles went up as buyers less concerned about prices rushed to take advantage of the rebates.
Inventory shortages from the popular program could keep prices high and drive down new vehicle sales. "We have created a sales bubble and now that bubble has burst," Anwyl said.
The Obama administration declared the program a major success, saying Cash for Clunkers provided a needed stimulus to the auto industry and the broader economy.
"Manufacturing plants have added shifts and recalled workers. Moribund showrooms were brought back to life and consumers bought fuel-efficient cars that will save them money and improve the environment," said Transportation Secretary Ray LaHood.
The White House Council of Economic Advisers said the program will boost economic growth in the third quarter by 0.3 to 0.4 percentage points because of the increased auto sales in July and August. An estimated 42,000 jobs will be created or saved during the second half of the year, the White House said.
The biggest industry beneficiaries were Japanese automakers Toyota, Honda and Nissan, which accounted for 41 percent of the new vehicle sales. That outpaced Detroit automakers General Motors, Ford and Chrysler, which had a share of nearly 39 percent. Toyota Motor Corp. led the industry with 19.4 percent of new sales, followed by General Motors Co. with 17.6 percent and Ford Motor Co. with 14.4 percent. Korean automaker Hyundai accounted for a 7 percent share, more than double its year to date average.
The Toyota Corolla was the most popular new vehicle purchased under the program. The Honda Civic, Toyota Camry and Ford Focus held the next three top spots. All four are built in the United States.
The program, which began in late July, offered consumers rebates of $3,500 or $4,500 off the price of a new vehicle in return for trading in their older, less fuel-efficient vehicles to be scrapped. The trade-in vehicles needed to get 18 miles per gallon or less.
It proved far more popular than lawmakers originally thought. Congress added another $2 billion to the original $1 billion budget when the first pot of money nearly ran out in a week. The extra money was supposed to last through Labor Day, but the funding only lasted about a month.
Dealers loved the new sales, but they reported major hassles trying to get the government to repay them for the rebates. Many dealers are still waiting to get paid.
Peter Kitzmiller, president of the Maryland Automobile Dealers Association, said most dealers appeared to get their paperwork in by the Tuesday night deadline and he was hopeful the pace of repayments would pick up.
The Transportation Department said Wednesday that 2,000 people are processing dealer applications. The program was expected to cost $50 million to administer, but Transportation officials said the administrative costs would exceed that amount. They expressed confidence the extra costs would not push the program's total expenditures beyond $3 billion.
Some consumers may be regretting their clunkers purchases, especially since many buyers traded in paid-off vehicles in return for new cars financed through loans. A survey of 1,000 Cash for Clunkers participants, conducted by CNW Research, an automotive research firm in Oregon, found that 17 percent had doubts about their vehicle purchase after taking on monthly car payments of $275 to $350 per month.
The government said 84 percent of the trade-ins were trucks and 59 percent of the new vehicles were passenger cars. New vehicles bought through Cash for Clunkers had an average fuel-efficiency of 24.9 miles per gallon, compared with an average of 15.8 mpg for trade-ins, a 58 percent improvement.
American companies accounted for all the top-10 traded-in vehicles. The Ford Explorer four-wheel-drive was the most popular, followed by the Ford F-150 Pickup two-wheel-drive, the Jeep Grand Cherokee four-wheel-drive and Ford Explorer two-wheel-drive.