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Cash for Clunkers: Federal program stalls as incentives fuel better-than expected auto sales

By Staff | Aug 1, 2009

The federal government announced a temporary suspension to the highly popular “Cash for Clunkers” trade-in program Thursday night after consumer trade-ins reached levels surpassing the original projections.
The Car Allowance Rebate System, lauded as a solution to help lagging sales within the car industry and to dispose of old cars with poor gas mileage, was officially unveiled on June 27.
For weeks local car dealerships unleashed an advertising blitz via radio and dealership signs hoping to draw in crowds and sell off inventories of new cars.
The $1 billion Cash for Clunkers fund is nearly gone after four days, forcing the government to temporarily suspend it until more funding is appropriated by the U.S. Congress. As of Friday afternoon the House put an additional $2 billion into the program, but the Senate won’t discuss it until next week.
Consumers rushed this week to receive a rebate worth $3,500 or $4,500 for an old car or truck with 18 miles-per-gallon or less. Reports from the Associated Press stated that 40,000 vehicles have been processed through the program with an additional 200,000 pending.
The original program was supposed to last until Nov. 1 or when the $1 billion funds ran out, whichever occurred first, according to the Cash for Clunkers’ official Web site (www.cars.gov).
“They are getting totally overwhelmed with paperwork coming through on the Internet,” said Michele Patrick, spokesperson for Fort Myers Toyota. “Everybody was frightened in how fast it took off.”
The Toyota dealership, which serves Fort Myers, Cape Coral, Naples and Bonita Springs, released a statement on Friday stating that the company would stand by any rebates given out this week.
“No one is to fear, if you do any transactions this weekend they will be honored and dealers are told to stay tuned,” said Patrick. “We are going to stay open until the last customer is here this weekend.”
Trade-ins under the Cash for Clunkers program have inundated Toyota, said Patrick. The dealership currently has an enormous collection of old cars, one was even turned over with a watermark from where a person pulled it out of Lake Okeechobee to get the rebate.
“We have a backyard full of clunkers, we have a collection of clunkers that is amazing,” said Patrick.
Robert Goodman, president of Saturn of Southwest Florida, said the dealership in Cape Coral is a part of Cash for Clunkers.
“It’s really rolling well for us right now,” said Goodman. “It’s been great, we are probably up 25 percent.”
Dealerships had to go through a tedious registration process with the National Highway Traffic Safety Administration to participate in Cash for Clunkers. Many complained about having to devote hours to the process because thousands of dealers tried registering at the same time.
“It was a little bit of a fiasco, it took us six hours to register,” said Goodman.
Goodman stressed that local Saturn dealerships will continue to offer Cash for Clunkers rebates until the government tells them otherwise.
Roger Dean Chevrolet General Manager Dave Large said Friday that the dealership will continue to honor rebates and that local turnout has been great.
Although most dealerships are continuing to give out the rebates, National Automobile Dealers Association Chairman John McEleney said there is some confusion among dealers whether the program will be extended. NADA said it’s working with the government to ensure all rebates are honored.
“NADA will continue to work with NHTSA to emphasize the importance that every dealer is reimbursed for a valid deal,” said McEleney, in a prepared statement. “Without question, the Cash for Clunkers program has been very successful in accomplishing its goal of boosting new car and truck sales.”
The older cars traded in to dealerships are later shredded or crushed, according to mandates in the CARS Act, and disposed of so the car can’t be later resold outside of the United States.