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Cash for Clunkers Gets Yet Another Extension

Dealers have until tonight to file their paperwork

By Truman Lewis and Martin H. Bosworth
ConsumerAffairs.com

August 25, 2009

It's the second deadline extension since last week and is blamed on the Transportation Department's computer problems. The department has had trouble keeping up with dealer submissions because the department's computer system couldn't handle the crush of dealer submissions.

Dealers, on the other hand, have complained bitterly of delays in reimbursement and what they view as needlessly complex filing procedures.

This is likely to be another busy day for the overworked computer system, as dealers rush to close and submit last-minute deals.

The program, which enables drivers to trade in their old gas-guzzler for a credit of up to $4,500 towards a more eco-friendly vehicle, has been wildly popular with consumers, and credited with keeping auto manufacturers from shuttering plants and dealerships from closing.

"This program has been a lifeline to the automobile industry, jump starting a major sector of the economy and putting people back to work," said Transportation Secretary Ray LaHood on Friday. "At the same time, we've been able to take old, polluting cars off the road and help consumers purchase fuel efficient vehicles."

But it's also proven to be a headache for dealers and buyers alike, as the huge demand and complex requirements for making the sales led to the program running out of money before many claims could be properly reimbursed.

Because of a large number of pending transactions, no one is sure just how many vehicles have been sold and, therefore, no one knows exactly how much money has been spent. Congress allocated $3 billion for the program and the auto dealers' trade group suspects that every cent -- and then some -- is already spoken for. Federal officials have expressed confidence there's enough money to cover all the deals that have been made.

The Transportation Department said that as of today dealers have turned in applications for $1.9 billion in rebates for voucher payments made to customers.

"I know dealers are frustrated, but they're going to get paid," LaHood said earlier. Dealers have been complaining that the clunker program paperwork is too complex, that too many applications are rejected and that the processing time is excessive.

The National Automobile Dealers Association (NADA) yesterday formally asked the government to suspend the clunkers program because a survey by the group found that the $3 billion fund has been exhausted. General Motors, thrilled with the boost in sales, said it would provide cash advances to dealers to cover the outstanding rebates.

Ford and Chrysler didn't immediately respond to GM's offer to advance cash to cover dealers' outstanding rebate payments. GM said it will deposit the money in a dealer's open account and then retrieve it after 30 days if a payment had been received from the federal government.

GM said its sales over the past two months have exceeded internal forecasts by more than 60,000 vehicles, largely because of the clunkers program. New vehicle sales overall are expected to exceed 1 million in August, the first time that's happened in at least a year, according to J.D. Power and Associates.

Consumers stew

It's not just car dealers who are frustrated with the program. Would-be car buyers are also complaining of just about every type of snafu imaginable.

Many consumers have found dealers unwilling to hand over their new car until the dealer gets reimbursed by the feds. Consumer groups have warned that many auto dealers will attempt to "double-dip" and extract additional payment terms from buyers as the program winds down.

"I signed a purchase agreement and loan agreement to purchase a new 2009 Chevy Impala under the cash for clunker program," said Mike of Howell, Mich. "The new vehicle is suppose to be handed over at time of deal. Dealer has held new car for 3 weeks now and refuses to hand it over until they get reimbursement from the government of $3,500."

Fred of Longmeadow, Mass., not only didn't get his new vehicle -- his old one nearly went into the crusher.

"We purchased a new 2009 Chevy Silverado at Balise Chevrolet on 8/13/09. We had agreed on a price of $11900 with a $4500 cash for clunkers rebate," he told ConsumerAffairs.com. "They looked up the trade in vehicle and told us it qualified for a $4500 rebate."

Fred said he took out a loan to cover the agreed-upon price. When he went to pick up the new truck, "They took my old truck and wrote clunker on it and towed it away. The man who was delivering the car then informed us our truck did not qualify for the clunker rebate," he said.

"We could not afford to pay anymore for the truck so we had to cancel the deal and wait for an hour and a half to get our truck back. They blamed the cash for clunkers government website for the problem. I than had to go back to my bank and try to cancel the loan for the truck.," he said.

Nancy of Manchester, N.J. said she spoke with the Internet sales department at Pinebelt Chevy and was told there were two trucks of the type she wanted sitting on the dealer's lot. So she had her trade-in towed in, only to be disappointed.

"When I got there the salesman was rude, told me the truck was sold and they only had trucks with 6' beds when we needed a 8'. ... This was a bait and switch situation," said Nancy, who had to have her trade-in towed to another dealer.

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