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Dealers Quit 'Cash for Clunkers,' Calling Uncle Sam Too Slow to Pay
Dozens Say They Can't Afford to Front Money to Buyers While Awaiting Reimbursement

By Dana Hedgpeth
Washington Post Staff Writer
Thursday, August 20, 2009

Dozens of auto dealers in the New York area and at least one in Maryland are pulling out of the U.S. government's popular "Cash for Clunkers" program because of problems in getting reimbursed.

The general manager at Toyota of Bowie said the dealership stopped participating earlier this week because it cannot afford to advance the money for more rebates while waiting on the government to pay. And about half of the 425 members in the Greater New York Automobile Dealers Association have also left the program, according to the group's president.

"We're sitting with $1 million out," said Jim Bee, general manager of the Toyota of Bowie dealership. He said he has taken in between 150 and 160 clunkers and has not been paid a dime from the government.

Under the government's clunker program, people who scrap their gas guzzlers can get a voucher worth up to $4,500 toward a new, more fuel-efficient vehicle. 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.

"Let's say we've given the customer a $4,500 voucher," Bee said, "we've given that money in good faith. But if the clunker isn't approved, we'll have to eat that $4,500."

Mark Schienberg, the president of the New York area automobile dealers group, said the government needs to speed up the approval process because dealerships are cash-flow businesses. He said many of his members have complained about the length of the 10-page-plus application and about rejections that do not give clear explanations of what the problem was. If dealers that are already living hand-to-mouth do not get repaid soon, he said, it could force them into bankruptcy.

"The program was becoming too difficult for them to get through, and they couldn't float any more money," Schienberg said of the dealers that have pulled out.

Transportation Secretary Ray LaHood told reporters Wednesday that he understands some dealers are frustrated about delays in getting paid.

"They're going to get their money," LaHood pledged. "We have the money to provide for them. There will be no car dealers that won't be reimbursed."

LaHood said the Obama administration plans to provide more details this week on how much longer the car incentive program will last. He had previously said that a recent $2 billion boost in funding for the effort would carry the program until Labor Day.

To deal with the onslaught of applications, the National Highway Traffic Safety Administration has said it plans to triple the number of contract workers and federal employees processing the paperwork, to 1,100, by the end of the week.

So far, government officials said 435,102 transactions, worth $1.8 billion, have been turned in under the clunker program. Most of the trade-ins have been trucks and sport-utility vehicles. The Toyota Corolla, Honda Civic and Ford Focus have been the top three new vehicles bought under the program.

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