As 'Cash for Clunkers' Winds Down, More Dealers Pull Out Early

Edmunds.com senior analyst Jessica Caldwell said some dealerships are passing the pain on to customers, making them sign contingency agreements stipulating that they repay rebates to the dealers if the government ultimately rejects their clunker applications. Others, she said, have been "holding cars hostage" -- taking in customers' old cars but refusing to provide the new ones until the government reimbursement has been made.

"That kind of stuff has really been unfair," she said. "I don't think it was ever the intention of the government to have so much liability shifted to the consumer."

The Department of Transportation said it is working to speed up reimbursements. It has tripled the number of people processing applications to a total of about 1,200.

Gates said that, for now, loans from Toyota are helping his dealership compensate for the government's late payments. Other auto manufacturers, including, most recently, General Motors, have taken similar measures to help struggling dealers.

DOT: We Won't Run Out of Cash

DOT spokeswoman Jill Zuckman said the government was confident that it would have enough funds to ultimately repay all the dealers.

"We have no intent to leave dealers high and dry," she said in an e-mailed statement to ABC News. "When all is said and done, we believe the dealers will have done very, very well under this program, not to mention the consumers, the car manufacturers and the environment."

Clunkers initially received $1 billion in federal funding -- money used to provide rebates of up to $4,500 to consumers trading in old, gas-guzzling cars for fuel-efficient new ones. After would-be car buyers swarmed dealerships at Clunkers' start in late July, concerns about dwindling funds for the surprisingly popular program prompted Congress to rush through $2 billion more in Clunkers support.

As of Friday morning, U.S. auto dealerships had submitted applications for more than $2 billion worth of deals since Clunkers began last month. The DOT said it would provide its next update on sales Monday morning.

Edmunds.com's Caldwell said the government might actually be left with extra money after the program ends. It took weeks for the program to soak up $2 billion, she said. The next few days, she predicted, won't see $1 billion more in deals.

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