LaHood: Car dealers will get their money from clunkers plan

WASHINGTON -- Transportation Secretary Ray LaHood assured car dealers Wednesday that they will be reimbursed for the money they have fronted to customers buying cars under the cash for clunkers program, responding to complaints over a backlog of rebate payments.

Dealers must pay the rebates out of pocket and wait for reimbursement from the federal government. Some car dealers have said their reimbursement requests have not been approved, leading to a cash crunch at their businesses. Dealers typically borrow money to put new cars on their lots and must repay lenders within a few days of a sale.

"I know dealers are frustrated. They're going to get their money," LaHood told reporters.

LaHood's assurances came as a growing number of dealers ceased offering the program. A group representing New York metro dealerships said Wednesday that that hundreds of its members have withdrawn from cash for clunkers, citing delays in getting reimbursed.

Through early Wednesday, auto dealers have made deals worth $1.81 billion and are on pace to exhaust the program's $3 billion in funds in early September. The program offers car buyers rebates of $3,500 or $4,500 for trading in older vehicles for new, more fuel-efficient models and has generated more than 435,000 vehicle sales.

LaHood said the Obama administration would soon announce how much longer the car incentive program will last.

The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said about half its 425 members have left the program because they cannot afford to offer more rebates. They're also worried about getting repaid, the group said.

"(The government) needs to move the system forward and they need to start paying these dealers," said Mark Schienberg, the group's president. "This is a cash-dependent business."

Schienberg said the group's dealers have been repaid for only about 2% of the clunkers deals they've made so far.

The online reimbursement system was flooded with reimbursement requests shortly after the program began in late July, overwhelming the computer system and staff set up to process the deals. That led to big delays for dealers trying to file the paperwork they needed to get paid back for the rebates.