The “cash for clunkers” program came to a close last night. Here’s a brief wrap-up on its perceived successes and shortcomings.

The federal government’s Car Allowance Rebate System (CARS), widely known as “cash for clunkers,” officially ended last night. While the incentive program gave a much-needed boost to sluggish auto sales, it has also raised questions about the possible effects of “cash for clunkers” further down the line.

The unexpectedly popular program, which allowed consumers to trade in an older vehicle or light truck for up to $4,500 toward a more fuel-efficient model, exhausted its initial $1 billion budget within two weeks before being extended with an additional $2 billion in funding. Intended to run from July 27 through November 1, the program depleted its expanded budget in less than a month before coming to a close at 8 p.m. yesterday.

Intended to stimulate the auto industry and boost vehicle demand during a period of ailing sales, “cash for clunkers” was expected to produce 250,000 vehicle sales. While final totals may take weeks to determine, initial estimates claim the program generated approximately 625,000 applications for trade-in vouchers valued at $2.58 billion, Agence France-Presse reports.

According to AFP, forecasters from Edmunds.com predict the auto industry will have a seasonally adjusted annualized rate of sales (SAAR) of 13 to 13.5 million for August, estimating that the final weekend of “cash for clunkers” brought in an SAAR of 15 million sales alone. Considering that the industry has struggled to surpass an SAAR of 10 million throughout the year, “cash for clunkers” likely provided a crucial boost.

The White House Council of Economic Advisors claims that the effects of “cash for clunkers” will create or save 21,000 jobs in 2009, as well as bring the United States’ gross domestic product in the third quarter 0.3 to 0.4 percentage points higher than it would have been without the program, the Wall Street Journal reports.

Likewise, Moody’s Economy.com (subscription required) projects that the trade-in vehicle initiative will be a significant contributor to a nationwide third-quarter increase in real spending of 2.2 percent at an annual rate.

But some observers remain cautious about the “cash for clunkers” program, citing the possibility of long-term side effects for the auto industry and the economy as a whole.

For one, the auto industry’s past experience with cash and financing incentives to boost short-term sales indicates that the more than 600,000 trade-in deals may undercut demand for future purchases.

“There might not be as many people to buy because they bought during the clunker program. And if at the same time there’s less of an incentive program from carmakers, you could have fewer people buying. That could stall the recovery we’re in,” Jeff Shuster, executive director of forecasting at J.D. Power and Associates, told the Washington Post.

Dealers worry that a significant proportion of the people who participated in “cash for clunkers” may have been in the market for a later purchase, and thus the program merely accelerated sales for 2009 by draining demand from the next few years.

“I think clearly sales will drop. It was such a rapid acceleration so you always have some fall-off,” National Automobile Dealers Association Chairman John McEleney told Reuters.

“But I don’t think it will drop down to levels of the 9 or 9.5 million units range where we were before the clunkers program because we started to see some demand recovery prior to the program and the program demonstrates there is pent-up demand,” McEleney added.

The government has responded to the criticism, noting the importance of shoring up falling sales during a critical period of the recession.

“The real question is not, ‘Are these purchases that would have occurred at some point in the next five years?’ The real question is, ‘Have you induced a meaningful amount of demand that would not have occurred within the window when, for macroeconomic purposes, more demand was really important?’” Brian Deese, a White House advisor on the auto industry task force, told the Journal.

According to the Detroit News, the Detroit Three automakers may not have benefited from the trade-in program in terms of market share. Although General Motors Corp. accounts for 19.6 percent of U.S. auto sales, its vehicles constituted only 17.7 of clunker sales. Meanwhile, Ford Motor Co. has 16.2 percent of market share versus 15 percent of clunker sales, and Chrysler LLC has 9.6 percent against 8 percent of clunkers sold.

Of the 10 most popular car models purchased with trade-in rebates, 54 percent were U.S.-built.

In addition, some dealers are concerned about the government reimbursements promised for the $3,500 to $4,500 vouchers they took on. The intense paperwork, computer glitches and tight budget margins have created doubts about voucher repayment among many auto sellers, the L.A. Times reports.

It remains to be seen how the “cash for clunkers” program has benefited the auto industry and the U.S. economy in the long-term. Despite the uncertainties, however, car sales and consumer confidence have received a major boost.

As an auto dealer in Fairfax, Virginia, recently told the Post: “None of us have a crystal ball. It brought a lot of business forward that we weren’t naturally going to see in the next year or two years.”

Earlier

“Cash for Clunkers” Plan Said to Have Beat Expectations

CARS Looking to Jumpstart Auto Sales

Resources

US Cash-for-Clunkers Roars to Finish Line
by Veronica Smith
Agence France-Presse, Aug. 24, 2009

Obama to End “Cash for Clunkers” on Monday
The Associated Press, Aug. 20, 2009

White House Expects “Gradual” Growth Offset from Clunkers Program
by Josh Mitchell
The Wall Street Journal, Aug. 24, 2009

Cash for Clunkers Payback Could Sink GDP
by Ryan Sweet
Moody’s Economy.com, Aug. 24, 2009

Dealers Get More Time on “Clunker” Rebates
by Andrea Fuller
The New York Times, Aug. 24, 2009

Auto Industry Braces for Hangover After the “Clunker” Party
by Dana Hedgpeth
The Washington Post, Aug. 25, 2009

Long-Term Impact of “Clunkers” Program Uncertain
by David Shepherdson
The Detroit News, Aug. 25, 2009