As the U.S. Senate moves a $2 billion Cash for Clunkers extension to the President's desk, a stimulus plan has been announced that aims to help deal with the used car bubble.

The measure, known formally as the Car Allowance Auto Rebate System (CARS), was approved last night by the Senate 60 to 37, extends the program that led to a spike in new car sales, with particularly positive results for Ford. President Barack Obama was expected to sign it quickly, according to news reports.

The initial $1 billion of funding approved in June for "clunker" business has generated more than $920 million in rebates and more than 220,000 in auto sales, according to the New York Times.

In the wake of the boost to the new vehicle market, some of the largest U.S. automotive retailers in the country have created a privately funded stimulus program to provide up to $4,500 in incentives for consumers to make it easier for them to get a used fuel efficient vehicle.

The dealer-funded Automotive Stimulus Plan was designed to complement the government's program and to compensate for some of the gaps that don't allow drivers to purchase pre-owned vehicles or choose a short term lease, according to dealers.

"The government program has been fantastic for business, but some of our customers have been disappointed because the program's rules left them behind," says Scott Gruwell from Courtesy Chevrolet, one of GM's largest dealers and one of the retailers participating in the Auto Stimulus Plan. "Letting consumers lease a new vehicle or buy a pre-owned vehicle makes it affordable for a lot of people who could not participate otherwise."

"The government's program helps approximately 10 percent of the market who qualify, but the majority of the consumers who want to upgrade into a more fuel efficient vehicle are not eligible for the governments program," says Brian Benstock, from Paragon Auto Group, one of the participating dealers in New York City. "Now we have a program that makes it easy for nearly all consumers with a vehicle that is older than a 2007 to get into a newer more fuel efficient vehicle."

The Automotive Stimulus Plan gives consumers up to $4.500 in incentives toward the purchase or lease of a new or pre-owned vehicle with a minimum of 2 mpg of improved fuel economy. The program promises fewer requirements, easier paperwork and no minimum mpg requirements, according to dealers.

"The government program is fantastic but there are still consumers who can't afford to buy new or who aren't eligible, and the Auto Stimulus Plan is designed to help them," says Rick Case, owner of Rick Case Automotive Group in Florida, Georgia and Ohio. "Consumers will pay less a year to drive a newer car because the payments are so low and the gas and repair savings are so high."

A recent Kelley Blue Book Market Report predicts a bubble in used-car values, which could deflate as the Cash for Clunkers program comes to a close.

Cash for Clunkers has pulled more than 250,000 used vehicles from the national fleet, equating to a 1.6 percent reduction in the overall supply of used vehicles (based upon sales of 16 million used vehicles in 2008), according to the company.

"Dealerships have reported increased foot traffic, creating a false sense of automotive market recovery," says Alec Gutierrez, senior analyst of vehicle valuation for Kelley Blue Book. "As a result, dealers are going to auction to restock inventory, driving up used-car values. However, the effect of a supply reduction of this magnitude could have an immense impact on these values in the short-term, exacerbating the already-limited supply at auction. If this bubble comes to pass, dealerships will end up with excess inventory of both new and used vehicles and be forced to offer deep discounts to remove surplus inventory, driving values down. Ultimately, there will be the possibility of a severe contraction in auto sales as soon as the Cash for Clunkers program runs out of funding."

According to a Kelley Blue Book Market Intelligence study on the Cash for Clunkers program, 1-in-10 new-vehicle shoppers said they are likely to purchase sooner as a result of the government-sponsored program.

In addition, 45 percent of consumers likely to participate in the program own a sedan, followed by SUV and crossover owners at 25 percent. Among that group, 37 percent plan to trade in their clunker for a sedan and 28 percent plan to buy an SUV or crossover. The top brands being considered among study participants are Toyota, Ford, Honda and Chevrolet.

For more information, visit www.kbb.com or www.AutoStimulusPlan.com.