Under the CARS program, or Cash for Clunkers, people driving older cars would receive a guaranteed trade in allowance of $3,500 or $4,500 for purchasing a new vehicle that met certain fuel economy standards. The way that it works is that the dealership advances these allowances to the buyer and then submits a reimbursement form to the government to get the money back.
At least, that was how it was supposed to work.
Administrative issues have led to many dealers being unable to submit the reimbursement forms, which are due at 8 PM tonight. Many dealers are reporting that the form package is too long and confusing, and that the website for submissions is frequently down. Others claim that there is no one to call for help in completing the reimbursement package and that the printed rules are no help.
To make matters worse, dealers are having trouble collecting on claims that they were able to file. In Virginia, the Automobile Dealers Association estimates that only about 3% of all claims filed have been paid by the government so far. They also estimate that one in four dealers are no longer participating in the program, citing fears of not being reimbursed. These aren't isolated incidents - these types of statistics are being repeated across the nation.
In the end, what seemed like a good deal may be going the way of other "great government social programs" like social security, welfare, or the WPA. The only difference here is that it took years or even decades for these other programs to flounder, but the CARS program is struggling after only a couple of months.
My concern will be what will happen if the dealers end up unable to receive reimbursement. Will consumers start getting bills for an additional $4,500 from the dealerships? If so, how many repossessions will that lead to? Or will the dealerships end up being expected to absorb the costs, placing even more strain on an already struggling industry? Only the future will tell.
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