UPDATE: Cash-For-Clunkers Adds $2 Billion, Lasts Through Labor Day

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Clunkers

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As expected, the US Senate voted yesterday to add $2 billion more to the Car Allowance Rebate Systems (CARS) program--better known as "Cash for Clunkers". President Barack Obama is expected to sign it today.

The vote approved a bill identical to the one passed last Friday by the US House of Representatives, before it recessed for August. The cash is expected to last roughly through Labor Day, and provide funds for roughly half a million additional clunker trade-ins.

The Clunkers plan has been remarkably successful at getting consumers into car dealerships, and the program appeared to have run through its initial allocation of $1 billion in just its first week.

Dealers must disable the engines of the cars traded in, though the rest of the vehicle can be sold to dismantlers or recyclers.

Cash-for-Clunkers engine destruction, using sodium silicate solution, from Wayzata Nissan

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Effects by state vary; so do votes

Republicans had initially announced they would oppose any extension, but heavy lobbying from both the White House and auto dealers combined with the Democratic majority to get the bill passed before the Senate starts its own summer recess on Monday.

The rate of clunker tradeins varied from state to state, with snowier states getting more cash per capita than Sunbelt states.

The final vote was 60 to 37 in favor of passing the extension. Democrats voted in favor 51 to 4, with Republicans opposing it 33 to 7. Both indepedent Senators voted in favor. By and large, Senators from states that benefited the most were more likely to vote in favor of extending the program.

Nine of 10 Senators from the five states that got the most cash per citizen--Minnesota, North and South Dakota, Wisconsin, and Maine--voted to support it. On the other hand, fully half the Senators from the five that got the least money per resident--Mississippi, Nevada, Hawaii, Wyoming, and California--opposed the extension.

Average mileage gain: almost 10 mpg

Initial data show the clunkers program is working: It is not only selling cars, but increasing gas mileage by far more than the minimum 4 mpg for cars and 2 mpg for trucks.

1999 Ford Explorer Sport

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As of Monday afternoon, the National Highway Traffic Safety Administration said almost 134,000 vehicles had been traded in, earning total rebates of $564 million. That averages out to more than $4,200 per sale, far higher than the minimum mileage gain needed to earn the base rebate of $3,500.

In fact, the US Transportation Department data showed a mileage gain of nearly 10 miles per gallon overall on the vehicles purchased as compared to the ones traded in, from 15.8 mpg for the trade-ins to 25.4 mpg for the new vehicles.

The top 10 most popular vehicles traded in are all light trucks from US makers, with the Ford Explorer sport-utility vehicle leading the list.

Dealers running out of cars?

As for selling cars, the rate of vehicle sales essentially doubled during the last week of July from its level before the program kicked off. Dealers are starting to report shortages of fuel-efficient cars like the 2009 Toyota Corolla, 2009 Ford Focus, and 2010 Toyota Prius.

But the torrid sales pace of July 27-31 isn't expected to continue indefinitely. For one thing, there may simply not be an additional 500,000 fuel-efficient new cars and trucks to available during August.

2009 Toyota Corolla

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Ramping up auto production is planned months in advance, and automakers will quietly admit they didn't expect the program to generate this volume of sals this quickly.