It”™s been good for consumers and manufacturers and a much-needed boost to car sales, but the “Cash for Clunkers” rebate program has been an administrative nightmare for Westchester County auto dealers still waiting to be paid by the federal government.
Dealers across the county last week described a common experience of frustration and uncertainty in dealing with a federal agency, the National Highway Traffic Safety Administration, that has been overwhelmed by demand for the Car Allowance Rebate System (CARS) program, which offers rebates of $3,500 and $4,500 to owners who trade in their less fuel-efficient vehicles for new fuel-saving models. At the same time, retailers said the program has jump-started sales in general on their lots and has largely depleted inventories of models eligible for the program.
But the financial risk weighs heavily on dealers who, six weeks after the $3 billion federal program was launched, still await approval of and payment for their clunker trade-in deals from Washington, D.C. They also have not been told when the program will end, which could leave them at risk for sales for which rebate funding might already be exhausted.
Through Aug. 18, dealers nationwide had submitted paperwork for 411,624 CARS sales totaling approximately $1.72 billion. Over the previous mid-August weekend, rebate-seeking consumers traded in 52,873 vehicles for more fuel-efficient models, the most popular of which has been the Toyota Corolla.
Yet only about 2 percent of the rebate funds approved by Congress have been paid out to dealers, Mark Schienberg, president of the Greater New York Automobile Dealers Association, said last week. He said about half of the association”™s 450 member dealers have said they will pull back from the program this week. “The retailers have basically had to deliver the vehicles and wait on blind faith for the government to repay them,” he said.
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At Smith Cairns Ford Lincoln Mercury in Yonkers, owner Dwight McGuirk last week said about 80 cars have been sold through the rebate program at his five dealerships in the area. “I haven”™t gotten paid one red cent yet,” he said.
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Nor have any of his rebate applications been approved by the program administrators. Of 47 applications sent from his Yonkers Ford business, 10 were rejected on technicalities and must be resubmitted, he said. Other Westchester dealers also said they have received several rejections on technicalities and no approvals.
“I do think the government will pay me. I just don”™t know when,” said McGuirk. “In the meantime, this is the biggest boost in sales we have had in a year and a half, so you just take it. For business, it has been good. On the flip side, if I need to wait six months to collect, it puts a huge dent in our cash flow.”
At Tarrytown Honda, owner Dwight Dachnowicz said he has heard of dealers looking to take out loans while their payments from the clunker program are delayed.
“Yes, it drives traffic, which is what we want,” he said of the CARS program, which has sparked a 42 percent rise in used car sales at his dealership since it began. “But how much financial liability can you put on the dealers? From a consumer standpoint, it”™s an outstanding program. From a dealer viewpoint, it”™s a tremendous risk. There are Honda dealers in my immediate area who have not done it whatsoever.”
When the rebate program was announced, Dachnowicz bought and shipped from South Carolina “a whole slew” of Honda Civic cars, which rank second in numbers sold in the program. His dealership has sold 74 cars to clunker traders. “I have not been paid on a single one yet,” he said. “It”™s easily over a quarter of a million dollars the government owes me.”
Dachnowicz said the government provided no training in the program for dealer employees; he sent his staff to a session offered by the Greater New York Automobile Dealers Association. At the program administrator”™s Washington office, “There are no yes-or-no answers,” he said. “The computer system is filled with glitches” and time-consuming to access. “As far as customer service, it”™s virtually nonexistent. There”™s no one to talk to.
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“There”™s no defining barometer on when the program will run out. As a dealer, my tough decision is going to be when do I call it quits on it. It”™s going to reach a point where it”™s not worth the dollar amount because there”™s so much liability out there. Unfortunately, all the onus is on the dealer.”
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Jonathan Grant, owner of four Chevrolet-Jeep-Dodge, Hyundai and Nissan dealerships in Yonkers and White Plains, said his businesses surpassed 100 rebate-eligible sales last weekend. “If they would just tell us we”™re accepted because we”™re on pins and needles waiting for this money,” he said.
The delayed payments to Grant amount to about $450,000. “In this market, that”™s pretty onerous,” he said. “It”™s onerous in any market.”
Grant said he has delivered about half of the vehicles sold in the program. He is asking buyers to voluntarily sign contingency agreements and leave checks for their rebate amount that the dealer will apply to the purchase if the government rejects an application. “A lot of them understand,” he said of customers. “Some of them get ticked off.”
CARS administrators have said consumers are not required to sign such agreements and the dealer must promptly deliver a sold vehicle if in stock.
“We”™re walking a fine line here,” Grant said. “I”™m not violating federal law. I want to protect myself. If we don”™t get that $4,500 on a deal, it”™s an absolute loss for us. We don”™t make anywhere near that on a deal.”
Grant said the clunkers program was too hastily put in place and would still have been “a rousing success” at lower cost to taxpayers if the government had capped rebates at $2,500. “The administration of this program is an absolute disaster,” he said. “It”™s an absolute nightmare.
“From the manufacturers”™ standpoint, it”™s been very positive and from the consumer standpoint it”™s very positive. From the dealer”™s standpoint, it”™s an unmitigated disaster.
“That being said, it”™s been great for business.”