Cash For Clunkers Faces Crash

Aug 20, 2009
When we recently reported on the status of the Cash for Clunkers program, it seemed like the program was on its way to greater success and more funding.  But now it looks like new problems may mean Cash for Clunkers is broken for good.

Auto dealers are pulling out of the program in large numbers due to concerns that they will not receive reimbursement for the money they have advanced to their customers in exchange for their old vehicles.  Each customer has been eligible for up to $4,500 dollars, resulting in advances of over $1 billion so far.  Slow processing of the paperwork involved in each transaction has left dealers with serious cash flow issues, as well as creating concerns that more deals have been made already than the program can support.  The most recent Department of Transportation figures put the number of deals made at over 457,000.

General Motors
is planning to keep the program alive with its dealers by providing cash advances to them in the amount of the federal reimbursement they are currently owed. US Secretary of Transportation Ray LaHood is also doing what he can to reassure dealers, asserting that the government has “put an enormous number of people on the task of processing the paperwork” and that “there will be no car dealer that won’t be reimbursed.”

The National Automobile Dealers Association released a statement this week saying that it would be best to suspend the Cash for Clunkers program now rather than wait for funds to be depleted: “Given the popularity of the program and the rapid pace at which ‘clunker’ deals are being done, it is difficult, if not impossible, to accurately project the ‘burn rate’ of available funds.”

Customers are also beginning to lose interest in Cash for Clunkers, making about 40 percent fewer claims than earlier this month.  This is partially due to depletion of eligible customers and customers who are interested in new cars postponing their purchases until prices get back to normal.

If you have been thinking about utilizing the benefits of Cash for Clunkers, now may be your last chance!  Secretary LaHood has just announced that Cash for Clunkers will end on Monday, August 24 at 8pm ET.  Turn in those clunkers this weekend!