The federal government's cash-for-clunkers program is expected to generate more sales in the U.S. asset-backed securities market as consumer trade-ins of old gas guzzlers for more fuel-efficient models generate new car loans.

So far 184,000 vehicles have been sold under the program with federal rebates totaling $775.2 million, according to U.S. Transportation Department data released on Wednesday.

While the program is giving a much-needed boost to sagging auto sales, it is also bolstering lending to consumers, the cornerstone of a more ambitious government program to stimulate the U.S. economy.

The cash-for-clunkers program is providing market liquidity, it's not just TALF doing all of that. People are borrowing money now to buy new cars, which means they're generating loan receivables which will ultimately be securitized, said Darcy Morrison, senior ABS analyst at Evergreen Investments in Charlotte, North Carolina.

Through the securitization process, lenders can remove existing loans from balance sheets, bundle them together and sell them as securities to investors, thereby enabling them to make new loans.

The program has helped auto sales and will make more collateral available for securitizations. The government is in the process of extending the program by a couple of billions of dollars, said Dan Castro, chief risk officer at Huxley Capital Management in New York.

The Senate is expected to vote on a $2 billion extension of the cash-for-clunkers program later Thursday.

The program is expected to have a more immediate effect on consumers than the Term Asset-Backed Securities Loan Facility, designed by the Federal Reserve to revive consumer lending and reopen the securitization market.

People don't understand that TALF was not designed directly to benefit consumers. The hope was that securitized deals would come to market and you could leverage them up, said Morrison. TALF has provided leverage to investors that are allowed to have leverage in their portfolios.

The month-old clunkers program has been more instrumental in getting consumers to spend.

As far as helping consumers, or getting consumers out of the mindframe that they're going to lose their job and cannot spend a nickel, the program provides incentives that get consumers, who are the driving force of the consumer ABS market, out into the arena, said Morrison. The offer of leverage to the guy who shops at the Wal-Mart does not.

LIQUIDITY BOOST

Under the cash-for-clunkers program, consumers receive a federally backed rebate of up to $4,500 for trade-in of an old car for a new one.

The Autoland dealership in Springfield, New Jersey, where Chrysler, Dodge, Jeep and Toyota vehicles are on display across massive lots, is reaping the fruits of the clunkers program's benefits.

Since the cash-for-clunkers program began, the traffic into our showrooms has at least doubled, said Danielle Peterson-Hanah, a salesperson at Autoland. The program's success is also being buoyed by rebates offered by some manufacturers on their vehicles.

For some buyers, the combination of rebates provides a downpayment for the purchase of a new vehicle, while reducing the size of the loan the borrower may need to complete the sales transaction.

The cash-for-clunkers program offers a $4,500 rebate on a Jeep Grand Cherokee and the manufacturer offers another $4,500 on the vehicle, so that's really helping to make the program even more successful, said Peterson-Hanah. After the rebates, the buyer is now financing a lower amount of debt.

The rebates offered by Chrysler, Jeep and Dodge have led to complete sellouts of some vehicles, like the Jeep Patriot and Dodge Compass.

One lady came to our dealership looking for a Dodge Compass after visiting eight other dealerships, which had been sold out, said Peterson-Hanah.