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Wednesday, April 7, 2010 as of 11:14 AM ET

Business

David Lewkowict

Atlanta, GA

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Cash 4 Clunkers puts Dealers in Fast Lane

August 4, 2009 - 5:20 PM | by: David Lewkowict

The U.S. government’s Car Allowance Rebate System, better known as “Cash for Clunkers”, gave car dealers a needed shot in the arm this week. The $1 billion program was designed to get low mileage cars and trucks off the road by giving drivers a $4,500 rebate on a new vehicle.

After just one week and nearly a quarter million cars sold the program is out of money. The U.S. House of Representatives has voted to move $2 billion additional dollars into the system, now the Senate will decide the schemes future.

The initial success not only means the program is out of cash but dealers running short of cars.

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A spokesperson for Nalley Toyota of Roswell, part of the Asbury Automotive, the nations sixth largest dealer group(NYSE: ABG) said the retailer was selling nearly five times their normal volume. 

” Just the buzz, the conversation people are having at work and at home, just talking about cars again will have a positive impact on our business, ” according to Gary Dodson, Operations manager for the 12 dealership group based in Atlanta.

Ford Motor Company announced Monday a 2.3% increase in sales in July, due to the government program.  GM said that the success of the program may require the company to increase production after deep cuts left them with a lack of inventory.  Toyota reported a $816 million quarterly loss — smaller than expected.

Alan Greenspan, former head of the Federal Reserve said cash for clunkers success was because the economy was on its way back.  ”It’s an interesting issue. I mean, I have qualms about the concept, but there is no doubt that that very extraordinary response is a very important indicator that the state of confidence in the economy is beginning to pick up. If we had been — the clunker program had been put in place six months ago, it would have probably been a dud,” Greenspan said on ABC’s This Week.

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