July 1 (Bloomberg) -- A U.S. “cash-for-clunkers” Web site got 400,000 hits in a week, signaling “huge interest” in the discount trade-in program for cars and light trucks, Transportation Secretary Ray LaHood said.

Consumers will be able to visit auto dealer showrooms as early as July 24 for credits of as much as $4,500 to purchase or lease new vehicles under federal rules now being crafted, LaHood said in a telephone interview yesterday.

“There are going to be thousands of cars sold that would’ve never been sold,” LaHood said. “This is the strongest incentive I have ever seen offered by car manufacturers. If this doesn’t work, I don’t know what will.”

The comments echo optimism by dealers, analysts and carmakers that the effort will help rebuild demand battered by the recession. June sales announced today show drops of 42 percent at Chrysler LLC, 34 percent at General Motors Corp. and 11 percent for Ford Motor Co.

The federal program, commonly referred to as cash-for- clunkers during congressional debates, lets consumers get the new-car credit for turning in a lower-mileage vehicle to be scrapped. The $1 billion in federal subsidies may spark 250,000 new car sales, U.S. lawmakers have said.

“When 400,000 people hit a Web site in seven days there’s a lot of interest,” LaHood said in the interview. “Whether that translates into 250,000 car sales, I think we don’t know.”

The National Highway Traffic Safety Administration, part of LaHood’s Transportation Department, has until July 24 to issue a rule outlining the operation of the program, which the government calls the Car Allowance Rebate System. Meanwhile, NHTSA set up a Web site to answer questions.

Clunker Agreements

John McEleney, president of two auto dealerships in Iowa, said the program is already prompting customer visits. His dealerships have already reached agreements with customers for four or five sales under the program, pending the completion of the federal rule, he said in an interview.

“There has been an awful lot of interest,” said McEleney, who is also the chairman of the National Automobile Dealers Association in McLean, Virginia. “The sales people are making contacts. It’s a great excuse to call a customer.”

Sales could grow as much as 12 percent during the four months the program is in operation, he said.

Mike Jackson, chief executive officer of AutoNation Inc., the biggest publicly traded U.S. car retailer, said last week the program may boost new-vehicle sales 10 percent.

The program will end Nov. 1 or when the $1 billion in subsidies expire, whichever occurs first. Congress must decide later this year whether to approve legislation extending the program into 2010.

‘Boost to Economy’

President Barack Obama signed the clunkers program into law June 24 after Congress approved it the previous week as part of legislation to finance the Iraq and Afghanistan wars.

Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, said in a note to clients last week that the plan “should give an additional boost to an economy already set to recover.”

The annual sales rate for June was 10.1 million cars and light trucks, based on 7 analyst estimates in a Bloomberg survey. That would be down 26 percent from 13.6 million a year earlier.

Consumers will get $4,500 vouchers if the new car they are buying gets 10 miles-a-gallon better gas mileage than the model they are trading in. For light trucks, the improvement must be 5 mpg better than the older model.

Trade-in Terms

For a $3,500 voucher, the improvement for cars must be 4 mpg or better, and for light trucks, 2 mpg. The trade-in vehicle must be no older than a 1984 model and get 18 mpg or less in combined city/highway fuel economy.

New passenger cars purchased with the vouchers must get at least 22 mpg in city/highway fuel economy, and light trucks must get at least 18 mpg. Domestic as well as foreign models sold in the U.S. qualify.

The federal rulemaking will resolve details such as how dealers register to participate in the program and how they get reimbursed for the consumer discounts, the NHTSA said in a notice last week.

The rule also aims to ensure dealers don’t substitute the credit for other rebates, and that dealers disclose to consumers the best estimate for the scrap value of the used vehicles, according to the NHTSA notice.

To contact the reporter on this story: John Hughes in Washington at jhughes5@bloomberg.net

Last Updated: July 1, 2009 14:36 EDT