Dealers opting out of Cash for Clunkers

The federal government is so slow sending the Cash for Clunkers welfare rebate checks to dealers that a lot of New York dealers are opting out of future C4C deals.

A New York dealership group says hundreds of its members have left the Cash for Clunkers program, citing delays in getting reimbursed by the government.

The president of the Greater New York Automobile Dealers Association says about half its 425 members have stopped offering rebates from the program because they can no longer afford them.
Mark Schienberg says the group's dealers have been repaid for only about 2 percent of the clunkers deals they've made, leaving many short on cash.

But discontent is not just in New York.

"A number of dealers have floated $100,000 to upwards of $1 million or more" on the clunkers program, said Bill Sepic, president of the Wisconsin Automobile & Truck Dealers Association.

Dealers say they want to see at least some sign that they will be able to recoup that money. Still others need the money to pay bills and meet payroll.

"This is not a Wisconsin problem," Sepic added. "This is going on across the country.

According to the terms of the C4C program, dealers advance the car buyer the amount of the "rebate," which varies from $3,500-$4,500. Then the dealer begins a "bureaucratic nightmare" application process to the CARS agency to get reimbursed. The application the dealer must submit is 20 pages long!

Like I said before on this and other administration programs: Don't worry - Obama's healthcare will be a model of clarity and efficiency. (How long will we and doctors wait to be paid?) So will cap and trade, you betcha.

Update: Arizona auto dealer owner Don Chalmers makes a good point about the reimbursements coming so slow.

Dealers across the state are owed more than $3.6 million, according to a dealers' group which says that so far Uncle Sam has only written three checks totaling about $14,000. ...

"I pay my bills," Chalmers said. "If I was three weeks or four weeks late on paying my taxes I suspect that they would be in my office real quick.

"We just expect the same sort of courtesy and treatment from the federal government."

NADA says Cash for Clunkers should be ended now

The National Automobile Dealers Association says that the "Cash for Clunkers" program is so poorly run that it should be shut down immediately. Despite Transportation Dept. Secretary Ray LaHood's promise that all dealers submitting valid applications would be reimbursed.

However, the NADA said, in its statement, that the group had “confirmed elsewhere” that dealers would not get paid if cash ran out.

Although, according to press reports, Secretary LaHood stated today that “there will be no car dealer that won’t be reimbursed,” NADA believes that this is based on DOT’s view that sufficient funds remain available. It is important to note that NHTSA has confirmed elsewhere that if the program’s money runs out before a dealer is reimbursed, that dealer will not be paid.

In a survey of nearly 800 dealers,

97% of dealers who responded, say the government is not reimbursing fast enough
13% of dealers have dropped out the program because the government is not reimbursing fast enough
87% percent of dealers are concerned the money will be exhausted
3% of CARS program deals have been reimbursed
66% of dealers have not received one payment from the government
25% of dealers are experiencing severe cash flow problems that require short-term loans to alleviate ...

READER REACTION

“The lack of cash is killing us,” one dealer said in the survey. “The lack of any kind of feedback from the government for the rebate applications is appalling.”

“My office manager got so fed up last week, she threatened to quit.”

“As I stated when the program first started, do not roll out a program until all the i’s are dotted and the t’s are crossed. That is just good business 101.”

“We stopped because we have only gotten two payments out of 120,” another dealer said. “They keep rejecting for various reasons, and the process is entirely too slow.”

“As a dealer, I would just as soon this program had never been approved despite the sales,” one respondent said. “It is a nightmare for all of us"

Index of related posts.

Well, ask and ye shall receive: "Obama admin. to end cash for clunkers on Monday."

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

Through Thursday, auto dealers have made deals worth $1.9 billion and are on pace to exhaust the program's $3 billion in early September. The incentives have generated more than 457,000 vehicle sales. Administration officials said they have reviewed nearly 40 percent of the transactions and have already paid out $145 million to dealers.

Well, the the wind down of the C4C program turns out to be "orderly," it'll be the only orderly thing about it.

So the feds have paid out 4.83 percent of claims so far. That means that a dealer that sold 50 cars, averaging $4,000 "rebate" per car has loaned $200,000 of its own money to the government but has received only $9,667 back. And that equation explains why dealers were dropping out before now.

$4,500 for everybody!

A few days ago I asked a simple question about the cash for clunkers program, in which the government gives my money and yours to someone else to buy a new car.

What's next, Vegas or Disney World vacations? Preposterous, you say? Why?

Today the Wall Street Journal asks basically the same thing in, "Cash From Clunkers-Let’s have a $4,500 subsidy for everything."

What the clunker policy really proves is that Americans aren’t stupid and will let some other taxpayer buy them a free lunch if given the chance. ... It’s hardly surprising that Peter is willing to use a donation from his neighbor Paul, midwifed by Uncle Sugar, to class up his driveway. ...

[S]ince money is no object, let’s give everyone a $4,500 voucher for other consumer goods. Let’s have taxpayers subsidize the purchase of kitchen appliances, women’s clothing, the latest Big Bertha driver—our Taylor-made is certainly a clunker—and new fishing boats. These are hardly less deserving of subsidies than cars, and as long as everyone thinks we can conjure wealth out of $4,500 giveaways, let’s go all the way.

But this program isn't near the success the administration is touting. An analysis on Edmunds.com says,

As we noted earlier in July, over 100,000 buyers had put their purchase on hold waiting for the Cash for Clunkers to launch. Is it any wonder that showrooms filled and the government servers crashed when this backlog of buyers rushed to finalize their purchase?

Secondly, last week we published an analysis showing that in any given month 60,000 to 70,000 "clunker-like" deals happen with no government program in place. In other words, the 200,000-plus deals the government was originally prepared to fund were barely above the "natural" clunker trade-in rate.

That would be the 100K deferred sales plus the normal 70K or so, totaling not much less, for economic effect, than the 200,000 that C4C is intended to fund.

In fact, students of economic theory will quickly recognize the dynamics of a classic shortage. We have taken three to four months of normal activity and caused them to occur over a few days, as consumers rushed to not miss out.

Both Edmunds and the WSJ predict that this fall, when the new-model-year cars are released, will see disappointing sales because people will have bought their new car this summer, to get the welfare payment C4C rebate while they can.

Beware, writes Michael Barone, of unintended consequences.

Cash for sharpies

Plus, "Honk if I'm paying your car loan"

I posted this morning the confusion surrounding the current status of the "cash for clunkers" program. Through links at Michelle Malkin's site, here are two interesting points about the "Car Allowance Rebate System."

1. Want to buy a new SUV using the program? Here's how: take your eligible trade-in to a car dealer and make a valid deal with the dealer on the cheapest car you can find that qualifies. Say you buy a small Kia for about $12,000, which is what they're being advertised for around my neck of the woods. Your cost is $7,500 ($12K-$4.5K CARS rebate, which the dealer credits to you and then gets reimbursed by the feds).

You have now bought a $12,000 car for $7,500. Immediately sell it privately for $11,000 (one assumes to someone who doesn't have an eligible trade-in to qualify for CARS). You just netted $3,500. Take the $11,000 and make a down payment on the SUV. The taxpayers have just funded your SUV in the amount of $3,500.

2. Yes, there are fraudsters out there making calls, emails and web sites telling you that you must "pre-register" with CARS before going to a dealer, so just call this 800 number or click here to do that, sucker.

But the Dakota Voice site says that the biggest fraud related to the CARS program is, well, the CARS program itself.

Cash for Clunkers fraud didn’t begin with the aforementioned websites; Cash for Clunkers is itself massive fraud perpetrated on the American taxpayer. Their hard-earned tax dollars are being confiscated by the federal government and given to other people to help them buy new cars, all in the name of fixing a problem that doesn’t even exist.

If that’s not fraud, I don’t know what is

The problem that he says doesn't even exist is anthropogenic global warming, for which replacing old, gas-guzzling, high-polluting cars with new, fuel-sipping, low-emissions cars is purportedly part of the answer.

I won't even go that far. I'll just stick with the basic premise: My personal wealth is being coercively taken from me by the government and given to others else so they can buy a new car. What's next, Vegas or Disney World vacations? Preposterous, you say? Why?

Honk if I'm paying your car loan.



Meanwhile, both my wife's and my cars are only five years old and too fuel efficient to qualify for the CARS program (except maybe for the Jetta TDI, which is already sold out), so I can't even participate in order to get my own money back.

Cash for Clunkers is a bureaucratic nightmare

A former car salesman peels the onion on the "cash for clunkers" program and explains why it has basically collapsed under its own weight. The full story is here, my summary is below.

1. The application per car is 20 pages! Because the information needed requires multiple sourcing, it can take dealers a few days to complete. Meanwhile, they've already credited the customer with the $3,500-$4,500 rebate, which comes out of the dealer's cash flow. Unless there is rapid turnaround by the feds to send the dealers the money, dealer rapidly are running out of cash reserves to float the balances. Basically, the dealers are loaning the government thousands of dollars per transaction.


2. Dealers have to permanently disable the drive train of the trade-in by pouring a specified solution of sodium silicate into the crankcase. This must be done before the junker can give his required signature. But this solution is in short supply and many dealers have run out.


3. Applications are completed on the CARS program's web site, but it repeatedly crashes because it can't handle the volume.


4. Many applications are denied by the feds, but the trade-in "clunker" has to be junked before the application can be submitted. That leaves dealers holding the bag - an empty one. They are asking customers to pay the amount of the refused rebate or turn the car back in - but the customers can't get their trade-in back because it's already been junked. Denial of rebates happens for a wide range of reasons, including a single field on the 20-page application left blank.

But don't worry - Obamacare will be a model of clarity and efficiency. So will cap and trade, you betcha.

See also Prof. Mark Perry's piece, "Cash for Clunkers: 136 Pages of Rules and Regs; How Many Pages for Government Health Care?"

Today the US House approved another $2B for the program. Which does nothing to address the structural, inherent flaws of the program. But that's Congress - any problem can be solved by throwing our money at it. When, oh, when will the government ever learn that it has no money of its own?

HT: Jaxson

"Cash for clunkers" - I told you so

Sometimes it stinks to have a crystal ball.

The US House just passed a "cash for clunkers" bill that awards an auto owner up to $4,500 "for trading in their older vehicles for new, more fuel efficient transport." (HT: Glenn Reynolds)

I didn't know that such legislation was even being proposed, but my June 2 posting, "Tax on owning older cars will be next," I predicted three government steps that would ultimately penalize people who hold on to old cars. The first, much higher MPG requirements, had already been dictated by President Obama. Here was the second:

2. Announce tax credits for cars older than X years taken off the road. We'll also be told that it's patriotic to buy a new car to help save the environment and rejuvenate the domestic auto industries.

While not precisely a tax credit, the voucher is money from the government that (presumably) is not subject to income tax, and so amounts to much the same thing. But wait, there's more:

The bill, which passed 298-119, drew overwhelming support from automakers, local business groups and dealers who claimed the passage could boost sales – further aiding GM and Chrysler's "reinvention" – during the economic downturn.

We gotcher patriotism right here! And then:

Dealers are required to provide proof that the vehicle (1984 MY or later) has been crushed or shredded, and the government estimates that around 25 million vehicles are eligible.

Which leads to my last prediction: the next step will be "tax penalties for hanging on to cars older than so many years." Just wait for it. And remember, you heard it here first.

BTW, if all 25 million eligible autos are awarded the maximum of $4,500, you and I will be further in hock to the amount of $112,500,000,000. Which is more evidence (as if any were still needed) of what I pointed out a long time ago,

Governance in America today means nothing much more than who benefits from the money funnel that we call the federal government. Whether Left or Right, whether Democrat or Republican, the only real questions of American government and governance are, "'Who will be be the beneficiaries of government spending? How much shall we exact from the public for it, and by what means?"

Every day we learn a new answer.

Cash for Clunkers "a complete waste"

As analysts predicted, now the the "Cash for Clunkers" program is ended, auto showrooms are as crowded as a church on Monday morning.

Now, customers at dealerships like Silko Honda in Raynham are few and far between, and inventory is once again accumulating.

Manager Adam Silverleib said business was “pretty intense’’ as a result of the federal stimulus program, with the dealership hustling to accommodate customers and handle the piles of paperwork required for them to receive reimbursement on vouchers. “Now we’re kind of back to where we were in the spring,’’ he said. ...

"It as probably, in the end, a complete waste of taxpayer money,’’ said John Wolkonowicz, a senior auto analyst at IHS Global Insight, Lexington forecasting firm. “The dealers, who were supposed to be the primary beneficiaries, many were forced into cash flow problems because the government didn’t pay them in a timely fashion."

Robert O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association, said, "Dealers are reporting that showrooms are pretty dead right now."

Exactly what analysts said would happen.

Cash for Clunkers a ball of confusion

Has the "Cash for Clunkers" program been suspended? Cancelled? Is it already out of money, or just backlogged so much that the feds don't know how much money they have to send out, or to whom?

Or all of the above?

First, the feds announced that the CARS program ("Car Allowance rebate System," how cute) was out of money. Or at least that was what the media understood because almost all the ledes on Google News about the program say that the programs burned through $1 billion in less than a week. One billion dollars was the Congressional authorization for the program.

But wait - the program's official web site, cars.gov, says (as of 7.30 a.m. CDT today) that there are still "$779M Estimated funds remaining for all vehicles except for CAT3 Trucks. $75M Estimated funds remaining for CAT3 Trucks."

But that does not tell us whether the program has actually paid out $146 million or whether that is the amount applied for with some still due out. This morning the government is saying that the program has not been suspended.

The NYT, however, indicates that CARS is molasses slow in sending the checks to the dealers, who have already rebated the $3,500-$4,500 to buyers. The dealers send in the paperwork to CARS, which validates the validity of the tradein before sending the money to the dealers.

“I’m waiting for the government to reimburse me for over $80,000,” Barry Magnus, general manager of DCH Paramus Honda, in Paramus, N.J., told us. He has completed deals on about two dozen cars, advancing his customers the rebates of between $3,500 and $4,500 each while he waits for the government to repay him.

So has the program been suspended or has it been ended due to exhaustion of funds? No one knows, even the people running the program. Says the Times writer,

In an unexpected move, the government halted the program, saying it proved so popular with the public that it ran out of money in just four days of official operation. The White House later told us and others on background that the program had not been suspended, but hastened to add that all deals in the hopper before midnight Thursday would be honored — making it sound as if it had been suspended.

My take:

• the CARS agency was unprepared for the number of applications it would receive.
• It was neither staffed, equipped nor trained to handle the workload.
• While CARS probably knows how much money it has actually mailed out ("probably" know, I said) it has no idea how much money is tied up in unprocessed applications

Maybe today they'll figure out how to proceed. And maybe not.

And remember - this is the Congress and administration that wants to handle your health-insurance budget and payments all the time, not just one time. Yeah, that makes me feel good.

Volkswagen joins the Tea Party

This ad for the VW Jetta has been all over the TV in recent weeks.



Let's do a little exegesis. The wanna-be Jetta owner is a working stiff. He's as far from the Political Class as a man can be. He wants a new Jetta, but he works for it. He doesn't look for a government program ("i.e., "Cash for Clunkers") to fund it. He even accepts menial labor to achieve his dream. He is goal-oriented, future driven, self reliant. At the end he enjoys the fruits of his own labor, having worked worked hard enough for not one, but two Jettas. The first in "Mine" and the second is "Mine too," not "Mine" and "The government's to spread the wealth around."

Read the rest!

Citizens or subjects?

Georgetown professor of Constitutional law Randy Barnett, Dec. 13, 2010:

If economic mandates like this one are allowed, however, Americans will be demoted from citizens to subjects. They will have to obey any commands that Congress deems convenient to its regulation of interstate commerce. No more expensive tax credits and subsidies to raise taxes to pay for; Congress can just command you to buy its favored products. Forget cash for clunkers; just make Americans buy cars from G.M. Or make them undergo medical exams to save on health care costs. Gone will be a federal government of limited and enumerated powers established by the Constitution and repeatedly affirmed by the Supreme Court.

Me, last March 24:

The question has been asked repeatedly since Sunday where in the Constitution is the Congress granted the authority to mandate that individuals buy health insurance. The answer is, of course, nowhere, not even in the Constitution's "good and welfare" clause that House Judiciary Committee Chairman John Conyers, D-Mich., claimed justified the act. But of course, there is no such clause.

The Constitution does begin by saying that it's purpose is (among others) to "promote the general welfare." The signs have been evident for literally decades, but now it is blindingly clear that Democrat party believes that the preamble - which delegates no powers, that comes later in the document - gives them unlimited authority "to control the people," in the words this week of Rep. John Dingell.

The entire Founders' insight that government has no rights, only powers delegated to it by the people, has been tossed on the ash heap of history. With Sunday night's vote and the self-triumphant signing of bill by President Obama, "we the people of the United States" has been struck through. The operating slogan now is, "You the subjects of the Sovereign Congress."

I wrote in 2003 that this was where we are headed. I never imagined it would come this quickly.

This is indeed the choice before us if we do not reclaim the sovereignty of the people.

Cash for phones? Why not?

If "Cash for Clunkers" new car buyers - who make an average of $57,000 per year - can get federal payment to buy new cars, why not subsidize most anything else? Having already asked that question ("4,500 for everybody!") and noting that the WSJ subsequently asked the same thing, I was amused to receive this email today:

I just finished reading your blog about your new phone. I made the jump about a month ago to the Blackberry Storm. Primarily for 2 reasons. 1st and foremost, I too am a Verizon customer and really didn’t want to stray from their superior coverage area and 2 the phone only cost me $29 after all the bribes, rebates, inducements to remain a loyal Verizon customer.

What I really wanted was the new I-phone, but I did not want to have to change to At&T and I did not want to have to pay the $2-300 for the phone. My son has the new I-phone and it is pretty slick from the standpoint it appears to be much faster in loading and performing tasks. I will probably make an I-phone my next phone in 2 years as I think by then all carriers will have access to selling all phones. Hopefully Obama will have a cash for phones program by then too.

Again I ask, why not? The principle has been set, all we're arguing about now is price and program? Say, why shouldn't the government offer to pay all the closing costs of home purchases?