Money Matters, Simplified.
Mission accomplished, CARS to end on Aug. 24
by Jamie Anderson - August 21, 2009 - comments
The cash for clunkers established beyond doubt that there is a lot of latent demand in the automobile sector. The honeymoon is, however, now over. The litmus test for the sector would be to keep up the sales tempo in the post-clunker environment
New York, August 21: The immensely popular cash for clunkers program will stop accepting applications for new trade-ins on Aug. 24 as it has exhausted lion’s share of its funding in less than a month.
There is no disputing the fact that it is because of the clunkers program, officially named as Cars Allowance Rebate System (CARS) the U.S. auto industry has been able to stand on its feet again after a long hiatus.
Transportation Secretary Ray LaHood said the program has been "a lifeline to the automobile industry, jump starting a major sector of the economy and putting people back to work".
According to the Transportation Department, as many as 457,000 dealer transactions worth $1.9 billion in rebates have been booked under the clunkers program.
Claims not paid
Amidst all this ecstasy, few dealers are really irate due to the slow processing of the repayments to be made to them by the government.
Of the total claims submitted to the government, only 40 percent of the claims have been reviewed. Worse still, barely $140 million that represents 7 percent of the claims submitted have in fact been paid.
Needless to say, these delayed payments have put tremendous financial burden on the dealers that are trying to keep their heads above the water.
Senate Majority Leader Harry Reid, a Nevada Democrat, highlighting the need to expedite payments said, “Dealers have been forced to effectively finance the CARS vouchers for buyers until the dealers are reimbursed by the federal government, placing a strain on dealers’ balance sheets that, if prolonged, could eventually offset some of the benefits of the program.”
Assurance from the government
Under the terms of the program, dealer were offered rebates between $3,500 and $4,500 depending on various parameters and the customers could swap their old clunkers with new, more fuel efficient cars. Thereafter, the dealers had to submit a 13-page application with proper documentation of the sale for their reimbursements to be made.
Alton Owen Jr., sales manager at Owen Ford in Jarratt, whose dealership has not been repaid for 21 sales said, "It has brought in some traffic that we would not have had, but if you don't get paid, it is all for naught."
President Barack Obama said that the program has been "successful beyond anybody's imagination”. In order to pacify the irate dealers, the president pledged that dealers "will get their money". He said that the administration has increased its staff strength three-fold to ensure speedy paperwork at the administration’s end.
LaHood too maintained that the Transportation Department was "working toward an orderly wind down of this very popular program".