Cash for Clunkers' Program Set to End Monday at 8 p.m.

By Dana HedgpethWashington Post Staff Writer Thursday, August 20, 2009; 5:04 PM
Transportation Secretary Ray LaHood announced that the popular "Cash for Clunkers" program will end at 8 p.m. on Monday because the $3 billion allotted for trade-ins has been largely spoken for.

Intended to bolster the auto companies and encourage consumers to buy fuel-efficient cars, the federally sponsored buyer incentive program proved to be wildly popular, attracting far more auto buyers than originally projected.


"It's been a thrill to be part of the best economic news story in America," LaHood said in a statement Thursday. "Now we are working toward an orderly wind down of this very popular program."

Dealerships have been swamped with consumers looking to trade in their clunkers for a voucher worth up to $4,500 toward the purchase of a new, more fuel-efficient vehicle. Under the program, which kicked off July 24, dealers essentially front the money for the cash incentive with the understanding that the government will reimburse them once they file the necessary paperwork online and the deal is approved. But many dealers said they have not been reimbursed by the government and are becoming more cash-strapped.


Transportation officials said paperwork representing 457,000 sales, worth about $1.9 billion, had been turned in to the government. Just under 40 percent -- or 170,000 -- of the applications have been reviewed so far, accounting for $145 million in payouts. But a large number of those are incomplete or have inaccurate information, which means the application is sent back to the dealer to be re-submitted, according to a senior administration official who briefed reporters Thursday.

Officials initially thought money for the program would last at least through Labor Day.
The National Automobile Dealers Association cautioned its members Thursday to not take more trade-ins, warning that there may be no more money left after the government processes thousands of backlogged applications.


"We are making dealers aware of the fact that [the Department of Transportation] has said that once the money is gone, that's it," said NADA Chairman John McEleney. "If there are more deals submitted than what the funds can support, there's a risk involved" that the dealer won't be reimbursed.

"There's [thousands of] vehicles being sold a day, so it doesn't take long to accelerate what's left pretty quickly," McEleney said. "The more conservative approach is for a dealer to sit back and wait so you don't make the situation any worse than it is in terms of exposure."


Another problem is that dealers have to pay off the loans they took out to buy vehicles from automakers once they sell the vehicles. But many dealers are now stretched so thin that without the reimbursement from the government they can't pay off their loans, and they are reluctant to sell more cars.


To try to help deal with this, General Motors said it will help cash-strapped dealers starting Thursday by advancing them a 30-day, interest-free loan for the rebate funds they are waiting to get from the government. The company said it is providing the funds so dealers have enough liquidity to run their businesses. The money has to be repaid within 30 days or GM will take it back from the dealer's account with the automaker, officials said.


"These dealers have hundreds of deals they're waiting to get reimbursed on from the government," said John McDonald, a GM spokesman. "What people don't realize is it is really tough on dealers to come up with this much money and deliver these cars if they're not getting paid."

GM has said it will increase its third- and fourth-quarter production because of demand from the clunkers program. Other automakers, including Ford, Chrysler and Toyota have said they would also increase their productions due in large part to the clunkers program.

To deal with the onslaught of paperwork, transportation officials said they expect to triple the number of workers processing forms by the end of this week to 1,100. The Department of Transportation said it has reviewed 167,000 applications, out of 458,000. They say they've also held web seminars to help dealers understand how to fill out the paperwork properly.


On his radio address Thursday, President Obama said the clunkers program had "been successful beyond anybody's imagination. And we're now slightly victims of success because the thing happened so quick, there was so much more demand than anybody expected, that dealers were overwhelmed with applications."


"I understand dealers want to get their money back as soon as possible, but the fact of the matter is this is a good-news story; they are seeing sales that they have not seen in years. And they will get their money, but we've got to process it properly." He called it a "high-class problem to have -- that we're selling too many cars too quickly and there's some backlog in the application process. It is getting fixed."

Staff writer Peter Whoriskey contributed to this report.

'Clunker' Rebates Stir Car Buyers

By ALEX P. KELLOGG and JOSH MITCHELL

The first weekend of "cash for clunkers" rebates boosted new-vehicle sales, despite minor snags and worries the program might not have a long-lasting effect.

On Monday, Daryl Little turned in his dusty 1995 Chevrolet Silverado pickup truck with 362,000 miles at Cook Chevrolet Pontiac Buick in Vassar, Mich., and drove off with a new, 2009 Silverado that qualified for the rebates because it gets much better gas mileage than his old one.

Mr. Little said he would have been lucky to get $1,200 for his old truck and wouldn't have had the money to buy the new one without the $4,500 clunker rebate. "I thought I'll never get a better deal," the construction-company manager said.

A sign advertises the government's cash-for-clunkers sales incentive at Tropical Chrysler Jeep in Miami Shores, Fla. Dealers reported strong sales over the weekend by buyers seeking the up to $4,500 allowances.

It is unclear, however, whether the $1 billion program -- officially the Cash Allowance Rebate System -- is going to boost sales over time or merely pull forward purchases by customers planning to buy new vehicles in the weeks or months ahead. The program is due to expire Nov 1.

"I don't think this is permanent by any means," said Emir Abinion, a former Ford dealer who owns two Volkswagen dealerships in suburban Chicago. "It's just a shot in the arm...I don't know one dealer who would think this will be a catalyst for sales."

George Fowler, a Pontiac-Buick-GMC dealer in Dearborn, Mich., said he has made seven sales so far through the program. More than 30 people have come in hoping to buy, but most didn't meet the qualifications. Most of those participating, he said, would likely have bought a new vehicle in the coming months regardless of the discount.

"These are people who would have been in the market anyway, and they have a trade that was worth $1,500 and now is worth $4,500," he said.

Under the program, new-car buyers can get $3,500 or $4,500 in rebates when they trade in older vehicles for more fuel-efficient models. The program was passed by Congress and signed into law by President Barack Obama in June, but the rules and details were only laid out Friday by the National Highway Traffic Safety Administration.

The White House is counting on the rebates to spur vehicle sales at a time when auto makers have been hit particularly hard by the recession. U.S. auto sales are on pace to total about 10 million vehicles, down from about 13 million in 2008 and 16 million in 2007. Boosting new-vehicle sales would also help the administration's efforts to turn around General Motors Co. and Chrysler Group LLC.

Nearly 16,000 auto dealers signed up to participate in the program, and a government hotline has handled more than 45,000 calls from people seeking information, a Transportation Department spokeswoman said. A Web site for the program registered 1.5 million hits since Friday.

A few glitches have appeared. Some dealers said junkyards in their area are ill-prepared to handle the influx of older cars expected to be scrapped. Others said the 136-page instruction manual provided by the government is confusing. Some consumers have been disappointed their cars don't qualify. The NHTSA Web site where dealers must register to participate crashed for a time on Friday due to heavy use.

But the program is bringing car buyers into showrooms, said dealers. At Paragon Honda in Queens, N.Y., General Manager Brian Benstock said he started working out clunker trade-ins before the program's official launch and has sold 50 cars this month, including eight over the weekend.

Few older Hondas qualify for the program given their fuel-efficiency, but it has been a bonus for
foreign auto makers, he said. Many of the vehicles turned in are GM and Ford pickups, he said. "This has all been a market-share gain for us," Mr. Benstock said.

Steve Cook, owner of the Michigan dealership where Mr. Little bought his new Silverado, said the past weekend was the busiest he has had in months. "I'm going to sell in a week what I sold in a month."

Mike Adamson, who owns three franchises around Rochester, Minn., has seen the clunkers program triple overall sales at his Lincoln Mercury, Hyundai and Chrysler Dodge dealerships. On Monday, his dealerships had sold 50 vehicles that were awaiting final government approvals.
"It's way more than I could have anticipated," said Mr. Adamson.—Sharon Terlep, Matthew Dolan and Jeff Bennett contributed to this article.

Write to Josh Mitchell at joshua.mitchell@dowjones.com Printed in The Wall Street Journal, page B2

Clunkermania officially began Friday.

The federal government finally released the rules that dealers and their customers have to follow to participate in the much-discussed "cash for clunkers" program, which can provide consumers with up to $4,500 when they trade in an older vehicle and buy a newer, more fuel-efficient model from a participating dealer.
Cash For Clunkers Bill

See If You're Eligible for a Trade In Voucher & Estimate Your Savings!http://www.cashforclunkerscarolinas.com/
$4500 For Your Clunker?

Up To $4500 For Your Old Car From U.S. Govt. Do You Qualify? Find Out
The law creating the $1-billion program went into effect July 1, but many dealers were reluctant to participate until they got a look at the rules. The arrival of the 100-plus-page document Friday morning sparked a registration rush that overwhelmed the government's computers, resulting in waits of two hours or more, the National Automobile Dealers Assn. reported.

The program is also exciting a fair amount of interest among consumers. Online auto information provider Edmunds .com said its traffic has been at record levels in recent weeks. Part of that comes from what may be the beginnings of a rebound in car sales, but the clunkers program is helping.

"We've clearly had traffic coming in that's being driven by 'cash for clunkers,' " said Marc Cannon, spokesman for AutoNation Inc., which owns 77 dealerships in California, including Power Chevrolet lots in Valencia, Hawthorne and Irvine. "We started doing deals early this morning."

Automakers are also jumping on the bandwagon. General Motors and Chrysler ran full-page ads in Friday's Times touting the program, and several manufacturers are offering special incentives.

The government estimates that the program will generate sales of 250,000 new cars, although Edmunds.com Chief Executive Jeremy Anwyl figures that about 200,000 of those sales would have happened anyway as part of the natural retirement rate of old vehicles.

Anwyl also notes that the rules are fiendishly complicated. Much of that is a result of the government's effort to prevent fraud. For instance, the program requires trade-ins to be junked, and the rules include elaborate procedures that dealers must follow to permanently disable the engines of clunker trade-ins so they can't be resold. (Part of the idea behind the law was to get older, less-fuel-efficient vehicles off the road.)

Shoppers may also be in for some frustration, above and beyond the tight restrictions they need to meet to qualify (read on for details on how the program works). For example, buyers must show proof of one year's insurance -- which would be recorded on their policy but may not be reflected on the insurance card they carry in their wallet.

Consumers should also be wary of official-looking clunkers websites that have sprung up, many of them asking for personal information. The official government website for the programs is http://www.cars.gov/ . The government has also set up a hotline at (866) 227-7891. You can also get official information from Saturn of Greenville, Saturn of Asheville, or Saturn of Spartanburg.

Kelley Blue Book (http://www.kbb.com/ ) and http://www.edmunds.com/ offer online calculators to help buyers decide whether a particular deal makes sense under the clunkers program.

Here are some questions and answers about the program.

How do I know if my trade-in vehicle is eligible for the program?

It must have been manufactured in 1984 or later and have a combined city-highway fuel economy rated at 18 miles per gallon or less. The program is advantageous only if the trade-in value is less than the minimum $3,500 offered by the government.

Can the credit be applied to any new vehicle?

All imports and domestics with a list price under $45,000 are eligible, as long as they meet fuel economy standards of at least 22 mpg for cars; 18 mpg for SUVs, small pickups and minivans; and 15 mpg for large vans and trucks. The new vehicle's fuel economy must exceed the trade-in's by at least 4 mpg for cars, 2 mpg for SUVs and 1 mpg for large trucks to qualify for the $3,500 rebate. The full $4,500 rebate kicks in at an increase of 10 mpg, 5 mpg and 2 mpg, respectively.

Remember, the mileage numbers are based on combined city-highway driving mileage as measured by the federal government -- not the mileage you actually get. The fuel economy numbers can be found at http://www.fueleconomy.gov/ .

What happens to the clunkers after the trade-in? Can they be resold?

The Car Allowance Rebate System requires that the trade-in be crushed or shredded so that it will not be resold. The wrecking yard is allowed to salvage some parts for resale, excluding the engine and drivetrain.

Can I game the system by going to a junkyard and buying a wreck to use as a trade-in?

No, the program requires the vehicle be in drivable condition, continuously insured and registered to the same owner for at least a year before the trade-in.

I have several clunkers in my garage. Can I trade them all in?

There is a limit of one trade-in per owner under the program, with the credit applying to the lease or purchase of a single new vehicle.

How long does the program last?

Until Nov. 1 or until the $1 billion is spent, whichever comes first.