July 27 (Bloomberg) -- Almost 16,000 U.S. auto dealers have applied to participate in the “cash-for-clunkers” vehicle trade-in program, or about 80 percent of the nation’s new- vehicle retailers, Transportation Secretary Ray LaHood said.

The government is trying to help jump-start slumping auto sales through the program, giving consumers new-vehicle credits of as much as $4,500 for turning in older cars.

“We’re very excited about the tremendous interest in this program,” LaHood said today at a news conference to outline the program. “We think it’s going to turn into a good news story for many communities that have been hit hard by the recession.”

Sales of cars and light trucks in 2008 fell to 13.2 million, after averaging more than 16 million a year during this decade, and General Motors Co. and Chrysler Group LLC are working to restore demand after emerging from bankruptcy. There were about 19,000 U.S. dealers at the end of June, according to the National Automobile Dealers Association.

The Transportation Department has processed 15,893 dealer applications, LaHood said. The law took effect on July 1, and the U.S. published rules for the program July 24.

LaHood said his agency has received 45,000 phone calls from people asking about the program.

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.

Consumer Incentive

The $1 billion in federal subsidies may spark 250,000 new car sales, U.S. lawmakers have said. They’re betting the clunkers effort will help spur purchases by consumers who weren’t otherwise in the market for a new car.

John Bailey, 26, said he traded in a car two days ago for a new Chevrolet Cobalt. Bailey, of Manassas, Virginia, said he wouldn’t have traded in his 1994 Oldsmobile had it not been for the cash-for-clunkers plan.

“It’s a great incentive for consumers,” said Bailey, who works in the shipping and receiving department of a semiconductor manufacturer.

Cash for clunkers 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 it into 2010.

“With the tremendous public interest leading up to today, we anticipate that the $1 billion in funding for the cash for clunkers program will go quickly,” John McEleney, chairman of the McLean, Virginia-based National Automobile Dealers Association, said in a statement today.

Representatives Sander Levin of Michigan and Betty Sutton of Ohio, both Democrats, said at the press conference that they may try to extend the program if the initial allotment is exhausted swiftly.

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

Last Updated: July 27, 2009 13:48 EDT