Clunkers' Tab So Far: $2.58 Billion

Aug. 24, 2009— -- With the deadline for the government's "Cash for Clunkers" program now just hours away, the Department of Transportation says the total requests for "clunkers" rebates are up to at least 625,000 at a value of $2.58 billion -- a more than half-billion-dollar increase from Friday morning.

The deadline for auto dealers to close all clunkers sales is 8 p.m. tonight. The deadline for dealers to submit Clunkers applications was initially also 8 p.m. tonight, but the DOT announced this afternoon that it would extend the deadline until noon tomorrow due to "overwhelming demand" on the government's CARS computer system.

The DOT said that despite "a large increase in the system's capacity," the system was shut down temporarily in the afternoon.

The DOT announcement comes days after the National Auto Dealers Association, citing frequent breakdowns in the system, called for an application deadline extension.

The government has allotted a total of $3 billion for clunkers deals, including $2 billion in additional funding approved by Congress earlier this month, following concerns that the wildly popular program would run out of cash.

Under the program, also known as the Car Allowance Rebate System or CARS, customers turning in gas-guzzling old cars receive rebates of up to $4,500 to be used toward the purchase of new vehicles.

As dealers struggle with computer issues, more and more would-be clunkers customers are finding their options limited by threadbare inventories and fewer participating dealers.

The clunkers applications that dealers submit to the government must include a customer's proof of insurance, title and registration for their old vehicles, among other documents. Critics have alleged that the application system is time-consuming and onerous.

After making dozens of sales on Friday and Saturday, Steve Gates, the owner of Toyota South, a Toyota dealership in Richmond, Ky., said he has just two new cars remaining on a lot usually full of more than 100 vehicles.

"A number of people have come in the last several days -- they were concerned that we were going out of business," after seeing his near-empty lot, Gates said.

Dealers Drop Out of Clunkers Early

Many dealerships stopped closing on clunkers deals this weekend or earlier, citing not just car shortages but also costly delays in government reimbursements.

Some analysts have calculated that the government has paid dealers for less than 10 percent of the rebates due. Dealers have argued that a lack of timely rebates leaves them low on cash flow, crippling their businesses.

In response to such complaints, the Department of Transportation tripled the number of staff handling rebate applications to 1,200, while individual car manufacturers, including Toyota and, more recently, General Motors, have offered financial help to struggling dealers.

Edmunds.com senior analyst Jessica Caldwell said she was surprised by the large jump in government rebate requests since Friday. Given the many dealerships that have pulled out of the program, she said the increase may be due more to a government backlog than to a half-billion-dollar increase in weekend sales.

"We knew it was going to be a big weekend, but this is pretty much a quarter of what happened before," she said. "It seems a bit sketchy."