For most automotive dealers around the country, there's no denying Cash for Clunkers has been a huge success.

"Cash for Clunkers opened up the floodgates to a market that was stubbornly locked," says Brian Benstock, vice president and general manager of Paragon Honda & Acura in Queens, N.Y. "Our business has doubled."

After closing down the program on Aug. 25, the Department of Transportation reported approximately 700,000 people had been recipients of the offered rebates. By early August, the government had issued rebates for more than 245,000 vehicles, and an additional $2 billion in funding was approved to cover 500,000 more.

"The effect was the most immediate and dramatic I've ever seen come out of a government program," says Scott Gruwell, sales director at Courtesy Chevrolet in California and Arizona.

Clunkers, however, has wreaked havoc on the used car market.

Because the engines in the vehicles being turned in must be disabled and the cars crushed, the program has not only removed otherwise usable cars from the used vehicle market, but also deprived aftermarket repairers of valuable salvage parts.

"We're selling 7 million fewer cars this year than last year, so you're losing seven million trade-in opportunities," Benstock says. "Now you have Cash for Clunkers, which does nothing to address that problem, and that has taken the older vehicles off the market."

According to the Kelley Blue Book "August 2009 Blue Book Market Report," there will likely be a bubble in used car values, which threatens to deflate as the program winds down. Taking 250,000 vehicles out of the used car market equates to a 1.6% reduction in supply. Dealers are stocking up on used vehicles, and when that bubble pops, dealerships with excess inventory and be forced to offer deep discounts.

There have been other unintended consequences as well. Charities like the Volunteers of America, which rely on sales of donated vehicles to help fund their activities, have seen donations plummet.

The dealers hope their Automotive Stimulus Program will help replenish used car stocks and, hopefully, bring down prices. According to J.D. Power, the average price of a used vehicle rose 7 percent from January to July.

"The price on used cars has got to come down," Benstock says. "We're paying above-normal prices for inventory, but customers are bottom fishing."

New car inventories are also thinning, and the dealers are concerned that the OEMs, having slowed production and shuttered a number of plants, may not be able to ramp back up quickly enough.

Even with the slump in new vehicle sales, many of the dealers contacted for this story have managed survive on other sources of revenue. "We were more profitable in July than we were last year mainly through used car sales and fixed operations," adds John Malishenko, operations manager at Germain Automotive, which has dealerships in Florida, Arizona, Ohio and Arkansas.

But what happens next? In August, Edmunds.com reported that consumer interest in Cash for Clunkers was waning, and many dealers had dropped out of the program because of concerns about reimbursement.

"Our biggest challenge moving forward will be maintaining that momentum" Benstock says. "The hoopla around Cash for Clunkers is dying down, so what's next? We have to make sure we have the answers for that firmly in place."