Autos August 20, 2009, 7:50PM EST

Cash for Clunkers Chugs to a Halt

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Government figures, based on fewer than 200,000 transactions analyzed, show that, despite the administrative fiasco, the program appears to have done its intended job of taking old gas guzzlers off the road and replacing them with newer, thriftier vehicles. The average fuel economy of those vehicles traded in is 15.5 mpg, while the average fuel economy of the new vehicles purchased is above 25 mpg. The language of the bill had been criticized by some lawmakers and environmentalists for favoring the sale of pickup trucks. But consumers had other ideas, buying small cars in much greater proportion.

"Consumers seemed to choose vehicles in order to get the maximum discount, which meant the highest fuel-economy vehicles, and seem to be buying insurance against higher prices at the pump ahead," said George Pipas, senior sales analyst at Ford Motor (F).

What Consumers Bought

The top 10 vehicles purchased were: Toyota Corolla, Honda (HMC) Civic, Ford Focus FWD, Toyota Camry, Toyota Prius, Hyundai Elantra, Ford Escape FWD, Honda Fit, Nissan (NSANY) Versa, and Honda CR-V 4WD. Just two of the top 10 were from U.S. automakers, though six of the 10 vehicles are built in the U.S.

By manufacturer, Toyota (TM), as of Aug. 14, was the biggest beneficiary of the program, accounting for 18.9% of transactions. General Motors was No. 2, claiming 17.6% of sales.

J.D. Power & Associates estimates the program will push industrywide U.S. sales close to 1.1 million for August, the first time monthly sales have topped 1 million all year.

Many lawmakers balked at supporting the legislation, especially after GM and Chrysler received tens of billions in taxpayer-funded loans. Internet message boards have been clogged with people complaining the government has no place funding other people's car purchases.

GM, just prior to the announcement to end the program, had decided to opt out of further clunker deals and agreed to advance money to cash-strapped dealers whose transactions hadn't been processed yet by the government. GM said it overshot its sales target for the last 60 days by 60,000 vehicles. GM, Ford, and others were all facing shortages of vehicles that qualified for the program, prompting GM and Ford to boost production and the Transportation Dept. last week to allow dealers to hand out vouchers to customers for cars that would have to be ordered.

The National Automobile Dealers Assn. warned dealers Aug. 19 of a rising chance that the program could run out of money unexpectedly, leaving dealers on the hook for vouchers of $3,500 to $4,500 per sale.

"Given that the funding could run out at any time, the government is erring on the side of caution so neither consumers nor dealers are left holding the bag," said Jeremy Anwyl, CEO of Edmunds.com. "We expect there will be a flurry of activity over the weekend as the program comes to a close."

Kiley is a senior correspondent in BusinessWeek's Detroit bureau.