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Dealers yet to see most Cash for Clunkers payments

WASHINGTON — Auto dealers say they still haven't been repaid for the majority of Cash for Clunkers deals they have made, creating cash crunches for many as they wait for the government to reimburse them under the popular $3 billion vehicle trade-in program.

Some dealers report they have hundreds of thousands of dollars worth of rebates they have submitted to the federal government for repayment that are still outstanding, including deals that were made in the first days of the program nearly three weeks ago.

Duane Paddock, who owns a Chevrolet dealership near Buffalo, N.Y., said dealers may stop selling clunkers under the program because of the funding lags.

"I've got dealers who are reporting to me that they've got over $3 million that they've fronted and they haven't been paid anything. It's just killing dealer cash flow right now," said Paddock, who serves as co-chairman of General Motors' northeast region dealer council.

Under Cash for Clunkers, car buyers are eligible for discounts of $3,500 or $4,500, depending on the fuel economy of the vehicles they trade in and buy. Dealers take the amount of the rebate off the sale price, then submit paperwork to the government proving the sale and that the trade-in will be scrapped.

The National Highway Traffic Safety Administration, the federal agency overseeing the program, said Friday that dealers have submitted requests for rebates that total $1.5 billion — half of the money allocated to the program — through the online system set up to process and pay the claims. But the NHTSA did not provide a dollar figure for the total amount that has actually been paid since the program began July 27.

There are indications that not much of that money has actually flowed to dealers. A survey of about one-fifth of Virginia's 519 dealerships done this week by the Virginia Automobile Dealers Association found that only 2.8 percent of the roughly 4,000 Cash for Clunkers deals submitted to the government have been reimbursed.

The program has also been plagued by heavy demand that has overwhelmed the computer system and review process the NHTSA set up. The agency has since hired more staffers to process claims and has increased the capacity of the computer network.

"The Department of Transportation is committing enormous resources and working overtime to process the overwhelming volume of applications both quickly and responsibly while getting rebates paid for complete and valid deals," said Sasha Johnson, a department spokeswoman.

The NHTSA has told dealers they can expect to wait 10 days to be repaid if their paperwork is in order and the deal is approved. But if there is a problem, dealers must resubmit their claim, leading to another potential wait period. That can create problems for dealers, who usually borrow money to put new cars on their lots and must repay lenders within a few days of a sale.

Government officials say a big hitch has been that dealers are not following proper procedures. For example, one of the main reasons Cash for Clunkers deals were rejected early on was because dealers failed to write "Junk Automobile, Cars.gov" in black magic marker on the title of the older cars that buyers were trading in.

Dealers yet to see most Cash for Clunkers payments 08/14/09 [Last modified: Friday, August 14, 2009 10:37pm]
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