Auto Dealers Brace Themselves as 'Clunkers' Program Nears Its End

Government pulling the plug on popular Cash for Clunkers program.

Aug. 20, 2009 — -- U.S. car dealers and their perspective customers are racing to meet a Monday deadline now that the government plans to end the popular Cash for Clunkers program, which offers rebates of up to $4,500 to car buyers trading in older, fuel-thirsty vehicles.

Dealers are bracing for a weekend rush of shoppers hoping to trade in their clunkers. The rebate program, which the government said today it would end Monday, has already helped sell an estimated 450,000 new cars since June.

But there is growing concern among many dealers that they won't be reimbursed for all of the rebate checks they've been writing.

Dealers say there is simply too much paper work being processed too slowly. And some have already opted out of the program because they haven't been paid yet.

"We've sold 20 cars and we haven't seen a cent," said Ken Helmbright, manager of Serra Chevrolet in Miamisburg, Ohio. "We're holding the bag on $100,000."

The message from Secretary of Transportation Ray LaHood: The money is on its way. "Every dealer with a deal in the pipeline will be paid," LaHood said. "We have the money to pay them and we're committed to doing that."

Almost from the start, the cash for clunkers program has been dogged by problems. Hasty planning and troubled execution nearly derailed the program early on.

Responsibility for the $3 billion stimulus program's flaws spread from Congress, which deeply underestimated how many people would be lured to dealerships by rebates, to the Transportation Department, which didn't set aside enough staff or resources to handle the program and government rules that created paperwork requirements many dealers didn't fully understand.

Approved in June, the program seemed straightforward. Dealers would offer rebates to customers seeking to trade in older vehicles for new, more fuel-efficient cars and trucks. The dealers would front the money and then be reimbursed by the government.

It has been a huge hit with car buyers. About 450,000 new vehicles have been sold under the program, worth nearly $2 billion. That is far more than the original expectations of analysts, who believed that Cash for Clunkers would provide only a small bump in sales.

President Barack Obama today acknowledged that there have been problems but said the program has been a success.

Cash for Clunkers an 'Overnight Success'

"I actually think this is a high-class problem to have," the president said. "We're selling too many cars too quickly and there's some backlog in the application process. It is getting fixed."

Meanwhile, a senior administration official briefing reporters on the end of the Cash for Clunkers program declared it "an overwhelming, overnight success" that has driven "positive outcomes across the industry."

With that ringing endorsement, the official said there is no plan for an extension of the program or another installment.

"Right now, we are focused on winding down the program in an orderly way, providing a soft landing and getting the applications processed and the dealers paid," the senior official told ABC News. "There's no plan to seek additional funding to have an additional extension of the program."

The senior administration official said there were no worries that the program would be overwhelmed by a surge in demand between now and Monday night, as consumers race to get in on the program before it closes.

The official said the administration is confident that its economic projections will allow the program to operate through 8 p.m. Monday in an orderly way, pointing to the $1.9 billion currently logged into the system.