WATERLOO - Clunkers are piling up while car dealers are waiting for cash to roll in.

A federal incentive of $3,500 to $4,500 for people who trade in their gas guzzler for a new, fuel-efficient car have brought people to car lots in droves.

"It's getting to the point that we are running out of cars that qualify for the program," said Jeremy Birdnow, manager at Birdnow Dealerships.

More than 40 clunker deals have been made at Community Motors. Witham Auto Center in Waterloo is out of the 2009 Ford Focus.

Tim Godfrey, general manager at Witham, said the dealership had plenty of inventory and the shortage isn't due to conservative business practices.

"We've been continuing to buy new cars," he said. "We had plenty in the pipeline."

While the 2009 Focus may not be on the lot, more than three dozen clunkers sit on a side lot at Witham Auto on La Porte Road. The lineup of condemned vehicles almost exclusively is American. Most are sport utility vehicles and, although some have peeling paint and rust, others appear in drivable condition.

"We're not going to destroy them until the paperwork goes through," said John Niday, Witham sales manager.

On Friday, Niday added a Dodge Durango he estimated could have as much as a $3,000 trade-in value to the Witham death row lot.

Dealers are collecting clunkers until the money promised by the program is in hand. That looked iffy last week when the first $1 billion Congress apportioned to the program ran out. Some car dealers said they were worried some of their sales would evaporate had the money not come through. Congress passed legislation, adding $2 billion to the program the senate approved Thursday night.

While interest in the program apparently surprised lawmakers, Godfrey said he was surprised at the number of people applying for the discount and the type of customers it has attracted.

"I envisioned people who would bring in their daily driver," he said. "I was afraid we would get people who would try to get approved and not qualify for financing."

Most of the customers are families trading in second or third cars they own and many have paid up front, Godfrey said.

Shoppers also have spilled over onto the used car lots. While the government incentive only applies to new cars, business sales on used cars went up at Holdiman motors when the plan went into place.

"It's getting people interested in buying cars," said Tom Holdiman. "It's got them thinking, even if they can't afford a new car."

Who it hurts

Those who make a living selling old auto parts may take a hit.

"My thought is it's going to take cars out of my industry," said Denny Osborn, owner of Waterloo Auto Parts.

The program stipulates that dealerships replace the clunker's oil with sodium silicate and run the engine until it seizes up. The car is then to be crushed or shredded, and no part of the engine may be resold. Osborn said some salvaged car engines are still valuable. Instead, they're being destroyed.

"Once they're gone, they're gone," Osborn said.

More debt

Critics of the clunkers program also say it is creating another economic bubble by encouraging people who can't afford a new car to buy one.

Kent Baldwin, a credit counselor with Consumer Credit Services said it's too early to know if the program has caused bad lending or borrowing. Baldwin said regardless of the government incentive, car shoppers need to be just as thorough as they would be applying for any other loan.

He recommends anyone who is getting a loan to first work out a budget, comparison shop, get their credit report and always read the fine print of the agreement.

"It's a good thing if it saves you some money," Baldwin said. "But you still need to go through those four steps."

The top-selling vehicle through the program is the Toyota Corolla, followed by the Ford Focus, Honda Civic, Toyota Prius and the Toyota Camry. The one SUV on the list, the Ford Escape, comes in a hybrid model that can get up to 32 miles per gallon. Six of the top-10 selling vehicles are built by foreign manufacturers, but most are built in North America. All 10 of the top clunkers turned in are made by U.S. manufacturers.