Cash For Clunkers Faces Possible Suspension

Posted by: David Kiley on July 30, 2009

There may need to be a new award for short-sightedness in Washington DC: The Clunker Award.

The U.S. Transportation Dept. is expected on Friday to announce a suspension of the popular “Cash for Clunkers” program that rewards car buyers for trading in old cars and trucks for new, more fuel efficient vehicles after just one week. Federal officials fear that a backlog of applications for rebates will quickly exhaust the fund, and will tell dealers on Friday to stop closing sales that depend on the government money.

The White House was working feverishly Thursday night to find a way to avert a suspension of the program.

The controversial program gives vehicle buyers either $3,500 or $4,500 depending on the vehicle being traded in and the vehicle purchased. Dealers began making sales based on the extra rebates earlier this month, weeks before the government began processing transactions last Friday. The backlog swamped the DOT’s ability to process the sales.

A suspension of the program would be a blow to a beleaguered auto industry, which just began seeing an upturn in sales thanks in part to the program. Automaker executives have said in recent days that July sales should clock in at an annualized rate of 12 million, compared with a rate of less than 10 million last month and for the first half of the year.

Congress last month approved the Car Allowance Rebate System (CARS) following the success of similar programs in Europe. It was supposed to be funded by $4 billion. But differences over the details between California Democrats and Midwest Democrats forced a compromise that granted only $1 billion. Legislators expected to revisit the program in the Fall for a second funding, as well as additional debate about modifying the details of the bill.

Through Wednesday, almost 23,000 vehicles had been purchased through the program. At least another 25,000 were believed to be sitting in the system unprocessed yet. And the fear is that dealers may have already processed more than 200,000 sales that haven’t been sent in yet. The DOT is concerned that sales are being made faster than the agency can process them, and that money will be promised to consumers beyond the $1 billion allocated so far.

Michigan Congresswoman Candace Miller spent Wednesday and Thursday lobbying Speaker of the House Nancy Pelosi to find additional funding before Congress adjourns.

“There can be no doubt that the Cash for Clunkers program is a complete success given the fact that the entire $1 billion allocated to the program was expended in less than a week,” said Miller late Thursday when word got out of the program’s suspension. “This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn. The federal government must come up with more money, immediately, to keep this program going. Whether we look at returned TARP funds or reprogram stimulus funds to a truly stimulative purpose, the administration must take action.”

Reader Comments

Gimme a BREAK

July 30, 2009 10:20 PM

Just more Detroit WELFARE, for the new clunkers they're spewing out like cheap garbage cans. Such an ENORMOUS waste!!!

Joellyn Mumcian

July 30, 2009 10:29 PM

I am devastated. I had an appointment tomorrow to take my "clunker" to a dealer to get the rebate on a new vehicle. The dealership called me a little while ago to tell me that if I didn't get in tonight then the deal is off. My son has the car, and I can't get in touch with him because he's in rehearsal. Why didn't we get more warning? I haven't had a new car in 25 years. Now I'm stuck with this gas guzzler until it gives out, which will be probably be soon. I can't afford to buy a new car without the rebate. I don't have the money for a down payment and I can't make the kind of payments that would be required without one. This is just wrong.

notafortunateson

July 30, 2009 10:38 PM

DAMMIT!!!!!

wtobias

July 30, 2009 10:46 PM

how much of the money went to American car manufacturers my bet is very little and that's why the are canceling

tony anderson

July 30, 2009 10:57 PM

i wonder how many foreign cars were bought with the tax money?has any one seen the commercial .Toyota is offering an extra 1000.00 if you turn in a gm,ford,or chrysler.for a Toyota.some of their pieces of s*&t are made here but,all profits go over seas.it is just knot right.........

Strategery

July 30, 2009 11:08 PM

So, if there are more claims than funds, who pays for it? The consumer, the dealer, the automaker or the DOT? I would also add the EPA, for their less than stellar performance in qualifying/disqualifying vehicles.

Dave Wilson

July 30, 2009 11:22 PM

I am very confident the Government will not leave the dealers across the country hanging. They did the program to help stimulate business and under estimated how much pent up demand there was out there from American consumers thirsting for an incentive to jump off the sidelines and in to the showrooms. I am in hopes they see that this is just what the Doctor ordered to and decide to expand this program to the original 5 billion dollars that was once on the table. Once again the Automobile industry has proven it is the back bone of the USA and is the key to jump starting our economy.

Dave Wilson

President

Preston Automotive Group

www.prestonmotor.com

dhw@prestonmotor.com

John Lavery

July 30, 2009 11:24 PM

What kind of FOOL calls a program that can be so easily SCAMMED "a complete success given the fact that the entire $1 billion allocated to the program was expended in less than a week," because it blew through a BILLION dollars, he probably thinks we should fund the other 3 BILLION. How STUPID are we for electing these fools that come up with these STUPID ideas. Fire them all.

Bart Rink

July 30, 2009 11:26 PM

End the program. now. get the government out of the private sector. let the free market work free.

kuei

July 31, 2009 1:06 AM

I am glad to see this stopped. To see americans trading in their cars to buy foreign cars with federal stimulus manoney makes me irate. Americans are just too stupid to understand anything. So let them bury themselves without my tax dollars. I have never seen a country with some many stupid people before in my life. I need a new country. Tired of being in a Special Olympic relay team.

Scott

July 31, 2009 2:58 AM

I wonder if they will release numbers on the estimated environmental benefits garnered by the program. Even an average increase of 5-10 miles a gallon multiplied by 250,000 will be a huge impact.

Pierre in NJ

July 31, 2009 5:04 AM

"This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn."

I always maintained, if the Government simply handed out $10-$20 thousand to everyone to do with what they wanted, rather than dribble it out to selected industries, pet projects and special interests as "investments in our future" or "to prop up the US financial system" - the economy would have immediately jump-started. Like water, money will seek it's own level. If I was given $10-20k - I would have used it to pay down my debts (instead of liquidating my 401k as I recently had to do to save my house). Someone else might have used it to buy a new car, boat, jewelry, take a vacation, or go out to dinner. Whatever way they chose to spend it, the money would have flowed. It would have sought it's own level - banks would get their "bad" loans paid, retail stores would sell inventory and order more - thus fewer layoffs & foreclosures, etc. etc. We would then be in an upward spiral instead of the lethargic mess we are in right now - anxiously waiting for the next economic report on unemployment, bankruptcies, or durable goods orders. Reports compiled and written by someone from the ivory tower (Business Week authors included) who only visits Main street occasionally to "gather data" or talk to an industry leader. Let's face it - Obama's "Green Jobs" are a myth, they don't exist, probably won't in the near future and when they do appear will most likely be exported. Our basic manufacturing and production jobs have been exported for years to the 3rd world and our tech/knowledge jobs are following closely behind. Joe the Plumber became a lightning rod during the election because he was from Main street and he spoke "Workingman" - plain and simple. No statistical analysis, no standard deviations, no normal/abnormal distributions - just plain old "seat of the pants Workingman." Joe doesn't visit Main St. occasionally, he lives on Main Street - as do I. The Clunkers program, perfectly illustrates my point and we need more of it. It immediately puts money into the hands of the consumer and gets it flowing through the economy. My only beef is that it first must go through the government (who takes its 20% cut and directs where it flows) before it gets to where it really needs to be - MAIN STREET!

Mash

July 31, 2009 5:28 AM

The program has been moderately successful in the UK, titled "Scrappage Scheme" as it has depressed the prices of second hand car. Thus it has having an unintended consequence of boosting volume sales in the second hand car market.

May be Americans should bring their cars to UK and opt for the Scrappage Scheme in place of the wobbly Cash for Clunkers.

Sandy

July 31, 2009 7:47 AM

I work at a Ford dealership in Indiana, and was tapped to be our C.A.R.S. (Cash for Clunkers) program expert/administrator. I am FURIOUS at the recent talks of suspension!!!

The program is NOT currently out of money. The CARS.gov website was updated (accurately) yesterday morning to reflect over 700M in available funds. This calculation was arrived at by assuming ALL deals that have been entered into their system (which is a requirement for the dealer to receive the funds reimbursement) go through.

The suspension was prompted by squeels from N.A.D.A. (National Auto Dealer's Association) due to a "poll" they ran questioning dealers about how much money they had "outstanding" through the program. I received this poll. It simply asked how many deals had a dealer completed that had not yet been entered into the C.A.R.S. system. It didn't ask why!

The "WHY" is partially due to a very slow system; clearly struggling to function with all the participation. However, the REAL reason deals are not already input is because they're not ready - they're not complete.

Everyone keeps whining about how tricky the program is and how apparantly it is unfeasible that adult business owners or their staff are capable of taking an extra hour or two in the month that preceeded the activiation of the program, to sit down and read all 136 pages! Really? Oh, please!

Dealerships are notorios for their "wing it and fling it" attitudes and actions. I know this. I have been a part of this industry for almost 20 years. But this isn't the 3rd grade here people! The provided manual, web-site, webinars, memos, and numerous other tools have been very clear in the program rules and practices. There have been no rules changed mid-stream. There have been no irrational add-ons. Anyone who is claiming any of these. in my opinion, is simply showing their iggnorance in that they never reviewed the step-by-step instructions provided that a 5 year old could follow.

Dealers have approached this with quirky advertising and enticements, sign a bunch of deals, then look around and say, "Huh? Are we supposed to get some paperwork or something for this?" I can not tell you how much I personally have been asked this question by other dealerships in the last week. It's pathetic!

If at the end of the day, dealers don't get reimbursed for a bunch of deals floating around the Nation, it will be because THEY didn't do what they were supposed to - NOT THE GOVERNMENT.

We have completed 11 of these transactions, all of which are currently being reviewed for re-imbursement. Our dealership is not concerned in the least that we will get this money. Not because we're blindly faithful to the efficiency or expediency of our gonvernment. But because, WE FOLLOWED THE RULES.

So, now dealers like me, are being cut-off so the whiny un-organized bunch can see if they really even have a deal that qualifies for the program or not. Then maybe they'll gather the required supporting documents, and then maybe input everything properly and in entirety into the C.A.R.S. system. Again, this isn't the 3rd grade. This just isn't that hard. What's hard, is trying to go backwards (after a customer has already signed, and is driving their new vehicle) and get the required stuff that's needed.

I am grossly disappointed in N.A.D.A. for their generic poll. I am disappointed in the media for not looking into it from the "wing it and fling it" perspective that has actually caused the problem. I am disappointed that that the powers that be in the government are entertaining this incompetence by suspending the program altogether.

Whew. Thanks for listening.


Sandy
Indiana

Joseph

July 31, 2009 9:40 AM

David, you must've rushed out to your laptop, or Blackberry, in your car to write this last night, because you were on the Autoline set when the news broke.

Taxpayer money to pour sodium in the crankcase of perfectly good engines? Not on my dime, Mr. Obama.

IMHO, let GM fund their own cash for clunkers with the $50 billion I already gave them.

He still your "savior"???

July 31, 2009 10:25 AM

"CHANGE" WE CAN BELIEVE IN!!

Don't blame me -- I vote Republican

Squeezebox

July 31, 2009 10:41 AM

This is a real bummer. I have a live-in boyfriend who has been unemployed for the last four years. The only work he seems to be able to get is mowing people's grass. I was hoping he could go around to dealers this week asking to kill cars for minimum wage. It doesn't take any special experience or expertise, just drain the oil, replace the plug, drive the car to where you want it to die, then run it with liquid glass in the crankcase. This would have been a temporary job, but at least it would have been a job created with stimulus money.

Turkina

July 31, 2009 10:52 AM

@Pierre
You do realize that $10,000 to every American would be an astronomical sum of money right (several TRILLION dollars)?

And, as for buying them "foreign" cars - my Hyundai was made in Alabama. My brother's ford was made in Mexico.

Crowe

July 31, 2009 11:32 AM

Read this article: The Real Reason for the "Cash for Clunkers" Suspension. The ex car salesman blog shares exactly why they stopped the program. Even reports that some sales managers are calling asking for the money back because they were denied the rebate when the final paperwork was submitted but their car was already ruined by dumping a solution in the engine. They now have no car. Scary. See: http://tinyurl.com/ml9sdo

cc

July 31, 2009 11:47 AM

I got a new car last Saturday. I've been on edge all week knowing the government is involved and how many speed bumps were out there just for a dealer to get registered (crashing server, etc.). I get a call from my dealer this AM asking me for the HN number - it's been a WEEK since I picked up the car..I sincerely hope they know what they're doing because I don't have 4500 to dole out to them. The guy told me I'm "in the pipeline and nothing to worry about." Funny, I still have trust issues...

terryk

July 31, 2009 12:13 PM

Just another short-sighted move by this "administration" and a Congress that has no clue how to manage anything but wants to manage everything. Pelosi, Reid, Frank, Dodd, Obama just keep jumping from one thing to another without any foresight.
Their goal seems to be to micromanage anything until they get distracted and jump to the next thing that grabs their attention.
That must have been what they really meant by "change".
It looks like the voters are catching on and will "change" them in 2010.

Brad

July 31, 2009 12:15 PM

Pierre in NJ has a good point. However, do the taxpayers not realize that programs the government creates are not created to really solve problems but to intiate more control over the taxpayers (uh, servants). We need to remove from office every congressional member and set term limits for the new office holders.

Dave

July 31, 2009 12:33 PM

No one seems to be talking about the negative environmental impact of taking cars (with the tremendous amount of energy invested in their production) prematurely out of service with years of useful life still in them. While there is an offset in the gasoline usage, there's no way the energy use is net positive overall. Another short-sited program.

Becky

July 31, 2009 12:34 PM

Pierre in NJ - I could not have said it better myself. We would not be in the mess we are in today if they had split the money among regular people. Regardless of how they spend it, it goes back into the economy at all levels.

Sandy in Indiana - Very well written response. It is good to know that there are responsible dealers out there. You are in the minority.

As I have been watching this play out on the news a question has been hovering in the back of my mind... what happens to all the "clunkers?" Our landfills are already overflowing. If they are going to be recycled, who will absorb that cost? Can our recyclers handle the increased volume? I just wonder if they have really thought this program through to its conclusion and considered all of the possible ramifications.

Becky McAfee, MBA

Financial Analyst, St. Johns

Adjunct Accounting Faculty, SBU

Missouri

terryk

July 31, 2009 12:43 PM

Politicians invariably respond to crisis - that in most cases they themselves created - by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspire the politicians to create more programs and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism. Welcome to Obama's People's Republic of America.

T Dub

July 31, 2009 12:43 PM

While my thoughts on the Clunkers program are mixed I cannot get over this : So many of you get so fired up you just wanna call the government, the dealerships, each other "ignorant, dumb and the like". This is of particular interest to me given the amount of misspelled words and grammatical errors I read in a handful of comments. C'mon guys, spell check for your own dignity's sake.

Poor Trillionaire

July 31, 2009 3:26 PM

Obama can fix it he has $trillions to spare. We should have made him president a long time ago.
I wonder why nobody esle knew the answer to all our problems was simply, "print more money".

We should make him our "KING"!

armand

July 31, 2009 10:09 PM

It's just another welfare program. The folks who have purchased cars many years ago and were mindful of the need for fuel efficient vehicles don't qualify for any rebate.

The stupid and inept government officials chose not to reward those who own efficient vehicles instead enabling many with junk cars to buy new vehicles at taxpayer expense.

The Mad Hedge Fund Trader

August 1, 2009 4:50 PM

How could this fail? Perhaps it was the newspaper gene in me that made me screech my car to a halt when I saw a near riot in progress at my local total Toyota dealer. The showroom was more jammed than the unemployment office, with eager salesmen recalled from vacations manning card tables set up in every available space. I managed to grab one peripatetic salesman by a lapel, who gushed that they sold 45 cars yesterday, compared to ten for a normal Friday, and that 35 of these were due to the Cash for Clunkers program. Sure I could get a $4,500 credit for my 1995 BMW (17 mpg), and apply it to a new Prius (50 mpg), taking the price down to $19,500 and the monthly payment to $450/month for five years. In fact, the government stimulus program was so successful, that it ran out of money in the first four days, and congress rushed to triple it to $3 billion on Friday. It was like the survivors of a ship torpedoed at sea were swimming frantically for the only piece of wreckage that floated. Assuming that the average car drives 10,000 miles a year, and the average swap generates a mileage improvement from 15 mpg to 27 mpg, junking 750,000 clunkers will save 30 million barrels of crude a year, 1.5 days of our total annual consumption, or three days of imports. I asked to see the cars that were traded in and was told that the lots for the dealer, the used cars, and the detailer were all full, but I could see some if I went to the Target nearby where they were renting extra spaces. There I saw the fleet condemned to clunkerdom, GM Safari’s, Jeep Cherokees, Buick Regals, Dodge Ram pickup trucks and vans, and Chrysler minivans by the dozen, all with “CFC” marked on their windshields, a certain death sentence. These sorry excuses for transportation will never belch blue smoke, nor drip oil on our interstates again. I can’t imagine a sorrier commentary on the management failure of the US car industry for the last 30 years. www.madhedgefundtrader.com

mike

August 2, 2009 10:54 AM

It is amazing I wondered how long this was going to last.... The idea that Americans are purchasing no US car is bad but Toyota Honda and other are ahead of US manufactures. All Toyota makes most of it's cars in Indiana and Alabama as it is so it does help the economy some what... One main program that has helped those non US companies is 6S

Mark

August 6, 2009 3:50 PM

Im really ashamed at all of you that not only have purchased a vehicle with these funds, but are now complaining that you didnt get yours.

You have absolutely no clue how bad this is for our country. you should be ashamed for being so selfish.

jhenry

August 10, 2009 7:02 AM

People say it is a good idea to negotiate the new car price before you tell the dealer that you have a clunker!

Jhenry
Blogger
www.cashforclunkersfacts.info
http://www.cashforclunkersfacts.info

jimwhenry

August 20, 2009 7:03 AM


People say it is a good idea to negotiate the new car price before you tell the dealer that you have a clunker!

Henry
Blogger
www.cashforclunkersfacts.info
http://www.cashforclunkersfacts.info

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