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Announcing: IOU’s For Clunkers

August 19, 2009 · · Filed Under Congress, FuelClinic, LinkedIn, News & Reports, Tax Credits, Twitter, United States 

If you’ve read this blog at all over the last month you know I do not support the CARS program because of it’s excessive wastefulness and questionable effect – perfectly good vehicles and used car parts being destroyed before their normal usable life-span in a dangerous and dirty government mandated procedure.

Now we’re learning that dealerships who participated and “fronted” the $3500 to $4500 government rebate to the customers are now having trouble getting the actual rebate from the government, causing immediate cash flow problems. They basically sold cars at a loss, intending to “make” their profit from somewhere in the rebate check.

If you remember the program works because the government offers consumers a roughly $4500 dollar rebate.

So every clunker a dealership takes in puts them in the red until the government reimburses them. “What you have is hundreds of thousands of dollars sitting out there waiting for the government to pay,” Speers said.
Sheppard Auto has yet to see any cash, “I’m not concerned,” Speers continued, “I think we will get paid, it’s just going to take longer than we anticipated.”

That is fine for big dealerships like Sheppard Motors and Kendall Auto. Kendall’s CEO said they have been paid for 84 of their clunkers, but they have sold about 600.

For smaller dealerships, keeping up with this could be trouble. “A small dealership would have a tough time continuing with this,” Jeff Shutt the GM of Nissan Lithia in Eugene said.

They are doing alright, despite not getting reimbursed for all their clunkers, but there are rumors in the industry that some small dealerships may have to discontinue the program, if they don’t see some cash fast.

Now dealers are waiting on the mailman, hoping that the check arrives soon enough to pay the bills. Wonderful. Payments are so slow that many dealers are opting-out of the IOU’s for Clunkers program.

What are your thoughts? Did you take advantage of C4C? If so, how did it work out for you?

UPDATE: Even more good news over at the LA Examiner

Natasha Bishop: My understanding of the program is that a customer comes in with their clunker and they hand it over to a dealership for a credit of $2500 to $4500 towards a new car.  Does the customer immediately get to take the new car home?

Megan N: The dealership must release the sold car even if government money has not yet been received.

Natasha Bishop:  Your dealership hands over the new car before any rebate money is seen?

Megan N:  Dealerships are having to front the cost and hope that they will get reimbursed by the government. Many dealerships would like to hold onto the sold car until they receive the government money.

Natasha Bishop:  That seems like a big risk for dealerships.  Why can’t dealerships hold cars?

Megan N:  The government is telling customers to report dealerships as they MUST release the car to the customer at time of purchase.

Natasha Bishop:  How does the dealership get their rebate for each clunker sale?

Megan N:  There are well over 20 pages of paperwork the dealership must fill out for each “Cash for Clunker” sold vehicle.  If there is one mistake on this paperwork the government will deny that dealership the money “rebate” for that sold vehicle. There are NO second chances to re-do this paperwork.

Natasha Bishop:  Sounds like dealerships could potentially lose millions of dollars from this program.  What happens to the clunkers when they are turned over to the dealership?


One Response to “Announcing: IOU’s For Clunkers”

  1. The Death of “Cash For Clunkers” | Fuelishness! Fuel Economy Blog on August 20th, 2009 10:39 PM

    […] like everyone has had enough of “Cash for Clunkers“: Through Thursday, auto dealers have made deals […]

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