The White House said late Thursday that it is rethinking the popular "cash for clunkers" program amid concerns that the $1 billion allotted for rebates for new auto purchases may have been burned through in the first week.

Officials from the U.S. Department of Transportation called lawmakers Thursday afternoon to alert them to plans to suspend the program as early as Friday. But a White House spokesman later said that the program has not been suspended and that officials were still assessing their options.

"We are working tonight to assess the situation facing what is obviously an incredibly popular program," White House press secretary Robert Gibbs said in a news conference of the Car Allowance Rebate System. "Auto dealers and consumers should have confidence that all valid CARS transactions that have taken place to date will be honored."

Gibbs said the administration was "evaluating all options" to keep the program funded.

A Transportation Department official said the department is working with Congress and the White House to keep the program going. The administration officials spoke on condition of anonymity because they were not authorized to speak publicly.

The CARS program offers owners of old cars and trucks $3,500 and $4,500 toward new, more fuel-efficient vehicles.

While dealers have given the rebates at the time of purchase, they have been submitting paperwork to the Transportation Department for reimbursement, a somewhat cumbersome process that dealers and the agency have been working to streamline.

Chris Baker, director of operations for Bob Baker Automotive in Carlsbad, said a suspension or re-evaluation would not be altogether surprising, given the torrid pace of sales under the program. The dealership group had sold 25 cars under the program, representing rebates totaling $100,000. Assuming similar sales by each of the participating 20,000 dealers across the nation, it's conceivable that claims for $2 billion may roll in.

"There's that disconnect between when the consumer takes advantage of that opportunity and when the government knows there's an obligation out there," Baker said. "The government has no idea until it's too late."

Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. Dealers generally praised the program, but many also expressed concerns that large backlogs in the system could prevent them from being repaid after initially financing the rebates.

Wrapping up its first week at most local dealerships, the program provided rebates to buyers who trade in vehicles that get 18 miles per gallon or less and improve their mileage by 2 to 10 miles per gallon.

Earlier in the week, dealers described the paperwork for the program as cumbersome but worthwhile in light of the extra business the program was bringing in. D.J. Heller of Heller Ford and Hyundai in Escondido said he spoke with relatively few dealers who opted not to participate.

Several local dealers said the program supercharged sales far beyond their expectations. The program was scheduled to end Nov. 1, or when the money was depleted.

"There's no way they're going to come even close to that date," Heller said Thursday before word of the reevaluation and possible suspension.

Toyota of Escondido sold 50 vehicles under the program during the first week, sales manager Tom Belt said. The projected monthly pace of 200 would overshadow the dealership's monthly average of 175, Belt said.

"It's probably one of the first government stimulus programs … that's really, for us, had an effect," Belt said.

The program -- called the Car Allowance Rebate System, or CARS -- officially took effect on July 1, but most local dealers waited until last week, after receiving final guidelines from the Transportation Department. Belt and another local dealer said they struck tentative deals with customers before the finalization.

Congress passed CARS earlier this year to boost flagging sales and get some of the filthiest cars and trucks off the nation's roads. Sales of new vehicles were down 43 percent in San Diego County in the first half of the year, and down by 48 percent in a mostly inland region that includes Riverside County.

The downturn has been devastating for manufacturers and dealers and has put pressure on municipal budgets in Escondido, Temecula and other cities where tax on car sales is a major revenue source.

Congress set aside $1 billion to remove about 250,000 vehicles through CARS. As of Thursday evening, about $779 million remained in the fund that covered passenger cars and most trucks, according to the National Highway Traffic Safety Administration. About $75 million remained in a separate fund for trucks with gross vehicle weights of 8,500 to 10,000 pounds.

The trade-in program applied to most vehicles of model year 1984 or newer that get 18 mpg or less in the government's combined highway/city ratings.

Rebates of $3,500 were available to car buyers who raise their fuel efficiency by 4 miles per gallon, while improvements of 10 miles a gallon qualify for $4,500. Those rebates are available to buyers who improve fuel efficiency by 2 and 5 miles per gallon, respectively, with a new truck, SUV or minivan.

Jill and Paschal Walsch of Hemet got a $4,500 credit Thursday for trading in their 1998 Ford Explorer, which had been driven about 120,000 miles. They said they ended up paying about $15,000 for a Honda Element, a small sport-utility vehicle rated at 23 miles a gallon, at the DCH Honda/Acura dealership in Temecula.

"I figured I would just drive it until it stopped and broke down," Jill Walsch said.

In effect, the rebates were worth $3,800 and $4,900, dealers noted, because sales tax didn't apply as it does on equivalent amounts of cash.

It was a good deal for customers with old vehicles that would have fetched smaller amounts in ordinary trade-ins. Heller said most of his 30-plus trade-ins might otherwise sell for $500 to $1,000. Many could justifiably be called "clunkers," he said.

Dealers nevertheless must drain oil from engines and run them until they seize, Heller said. The program requires dealers to certify that the "clunkers" are truly junked.

Some industry watchers had expressed skepticism that the program would do much to lift auto sales in the long run.

The auto Web site Edmunds.com said Americans trade in about 200,000 vehicles worth less than $4,500 in any given three-month period Given the program's 250,000-vehicle cap, that means it had the potential to spur no more than 50,000 additional car sales.

"The incremental sales will be limited and at a considerable cost," Edmunds CEO Jeremy Anwyl said. "We are paying consumers to do something most would do anyway."

Chrysler said it would match the government rebates dollar for dollar. A representative of DCH Chrysler Jeep Dodge in Temecula said Thursday morning that some customers paid about $10,000 for new Jeep Patriots, small SUVs that otherwise sell for about $19,000.

The Associated Press contributed to this story. Call staff writer Chris Bagley at 760-740-5444. Read his blogs at bizblogs.nctimes.com.

RELATED LINKS:

National Highway Traffic Safety Administration, CARS

CARS description at Edmunds.com

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