Cash Flow: The Real Reason for the "Cash for Clunkers" Suspension

I've spoken with several dealers concerning the cash for clunkers program and this video sums up the "cash for clunkers" suspension in great detail.

It is true the program is successful and will use allotted funds. But the situation is more sophisticated that that.

First, because of the popularity, there is a huge backlog of paperwork. The 20-page application requires data from various sources and in many cases takes days to complete. Dealers continue to sell cars while they wait for all the information required. One of the many hold-ups is the fact dealers must disable the 'clunker' with two quarts of a special sodium silicate solution before the car crushers can give them a required signature. However, many dealerships have run out of this solution or have not received it. If dealers continue to advance people the CARS credit, on faith the government will refund them for destroying a car, their cash flow will soon be depleted.

Second, the CARS dealer website -- where dealerships submit applications -- cannot handle the traffic. Dealers continuously report website crashes rendering them unable to submit their application. This increases the amount of time dealers must wait before they receive their rebate check -- depleting cash flow.

Third, worry is building in dealerships because many applications for the rebate are being denied after the car deal. Some on this blog have expressed outraged after dealers have called them back demanding the customer make up for the denied CARS rebate (up to $4,500.00) or else they would have to return the car. Some have already had their trade-in cars destroyed. (Related: Sortable Cash for Clunkers Car List).

Rebates have been denied for an untold number of reasons; including a blank field in the 20-page application.

So you see, even if the government institutes an emergency funding guarantee, the cash flow problems, from an inadequate structural setup, remain.

Watch:

Comments

[Jaxon]

So you see, even if the government institutes an emergency funding guarantee, the cash flow problems, from an inadequate structural setup, remain.

If they can't administer a program like this, I'd be a little concerned about my health insurance...

[josie]

I would say it's more like the dealers getting greedy and failing to properly verify that the trade in meets all the government requirements. I mean, car dealers are pristine, right?

[Chris]

Not that I'd argue about the greed of dealers, but.... The CARS program rules were not carbonized until Friday, July 24, and changes to eligibility were made up until that date. There are many cases where a dealer made a "deal" on a car that originally seemed to meet the eligibility requirements, only to find that something in the rules or EPA information had changed.

To be fair, CARS program recommendations to dealers were that they wait for July 24.

[Dave]

True that: If they cannot even administer a billion dollar program correctly, how can we trust with with a trillion dollar program... even 17% of our economy.

[Keith G.]

The thing is; is that the car dealers would have taken in the trades for $4500 anyway. The only difference is they wouldn't have had to purchase the "killing acid' that they have to pour into the engine to kill it before crushing it; they would have given the buyer a wholesale price for it and then sold him the new car as close to retail as they could, taking out the markup if they had to. Ex: NEW CAR:$22K used car: worth 3K they give him $4500 for it and then sell him the 22K car for 22K. There's four grand mark-up in the new car; so they made $2500 on the sale. Half these buyers never would have bought the new car if it wasn't for this bullshit program anyway.

Peace,

Keith G.

[mark]

What Keith said is completely stupid! 1st off what $22,000 car has a $4,000 markup, 2nd who pays MSRP for a car anymore, and lastly the majority of the cars traded in under this program have a wholesale value of little to nothing not the $2,500 Keith thinks.
Maybe do some research
Mark

[Keith G.]

Mark,

When you get $35 or $4500 for a trade-in worth $1500 you pay retail; when you get $1000 or $1500 for a trade-in that's worth $1500 you get a discount. UNDERSTAND NOW?