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Page last updated at 19:19 GMT, Friday, 31 July 2009 20:19 UK

US seeks to continue car rebates

A sign at an Oregon car-dealership saying "Cash for Clunkers"
The scheme has been more popular than the government expected

The US House of Representatives has approved an extra $2bn of funding for the Car Allowance Rebate System.

Under the scheme, Americans who trade in their old cars for more efficient models receive cash payments.

The programme was backed by $1bn (£600m) of stimulus funds, but has proved so popular that more cash is needed to keep it going.

The House has approved an extra $2bn, and the Senate is expected to vote on the matter next week.

But funding cannot be made available until the Senate approves it.

Bipartisan solution

Before the House of Representatives vote, US car-dealers had been expressing concerns that the government would not be able to honour pledges to pay car-buyers their promised rebates.

Under the terms of the programme, which has been dubbed "Cash for Clunkers", Americans are being offered up to $4,500 if they scrap their old cars or trucks and exchange them for new, more fuel-efficient vehicles.

It has succeeded well beyond our expectations
Barack Obama

Officials projected that $1bn would be enough to fund 250,000 transactions.

They planned for the scheme to operate until 1 November or until the money ran out, but sales volumes have been unexpectedly high, and the funding is drying up more quickly than had been predicted.

"I'm happy to report that it has succeeded well beyond our expectations and all expectations, and we're already seeing a dramatic increase in showroom traffic at local car dealers," said US President Barack Obama.

"It's working so well that there are legitimate concerns that the funds in this programme might soon be exhausted," Mr Obama added.

"So we're now working with Congress on a bipartisan solution to ensure that the program could continue for everyone out there who's still looking to make a trade."

No precise sales figures are available but the Associated Press has quoted Michigan Senator Debbie Stabenow as saying that some 40,000 sales have been completed through the scheme, with dealers estimating that a further 200,000 deals are in the pipeline.

In the House debate, some Republicans criticised the way in which the scheme had been implemented.

"I've got dealers who have submitted the paperwork three times and have gotten three rejections," said Representative Pete Hoekstra. "What is a dealer supposed to do?"

The scheme was designed to stimulate the US car industry, which has been hit badly by the global economic crisis.

Car sales for the first half of 2009 were down 35% from the same period in 2008, and observers are predicting only a slight recovery during the second half of the year.



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