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

Aug. 22, 2009 — -- Planning to stop by your local auto dealership for a "Cash for Clunkers" deal this weekend? You might want to call ahead first to make sure that dealer hasn't clocked out on "Clunkers."

As some auto dealerships prepare for what promises to be a frenzied last weekend for "Clunkers" -- also known as the Car Allowance Rebate System, or CARS -- others are closing the book early on the unexpectedly popular government program. The government will stop taking applications for the program on Monday at 8 p.m.

"We're being very cautious," said Edward Tonkin, the vice president of Ron Tonkin Dealerships in Portland, Ore., which expects to stop Clunkers participation among the company's 14 dealerships by today. Tonkin wants to be sure that the dealerships will have enough time to submit Clunkers applications before the government's deadline.

AutoNation, the country's largest dealership chain, stopped making clunker deals at its 239 dealerships Friday night. It, too, cited application concerns.

"We want to have ample time to get our paperwork done, which is due Monday at 8 p.m. And when you have as many deals we have, you want to make sure you are buttoned up," said AutoNation spokesman Marc Cannon.

The National Auto Dealers Association has called on the government to give auto dealers extra time to fill out Clunkers applications. NADA said that while the program should end on Monday, the dealers should be given until Aug. 31 to do their paperwork.

"This later deadline for submissions would help avoid computer slowdowns due to overwhelming demand, and ensure that the president's statement [Thursday] that every dealer 'will get their money' is achieved in a sensible, orderly manner," the association said in a statement issued Friday.

Other dealers say that a lack of inventory is forcing them to pull out.

"It's pandemonium," said Steve Gates, who owns Toyota South, a Toyota dealership in Richmond, Ky. He also expects to end his Clunkers deals today.

"I've likened it to a half-off sales at Macy's in New York," he said. "People are getting to the point where they're fighting over the remaining vehicles."

For other dealers, the problem is more about cash than cars.

Some 200 dealerships belonging to the Greater New York Automobile Dealers Association said on Thursday that they were withdrawing from the program because the government had taken too long to reimburse them for Clunker rebates.

"What we're hearing is they [the dealers] just can't afford to do it anymore," Mark Schienberg of the Greater New York Automobile Dealers Association told New York's WABC-TV.

Dealers, Customers Hurt by Late Government Payments

New York dealers aren't the only ones being stretched by the government's slow-going reimbursements. Nationwide, the lack of quick payback has hurt dealerships large and small, including Walker Motors, a Ford dealership in Montpelier, Vt.

Sales manager Kevin Murphy said the dealership has made seven Clunker deals and hasn't received government funds for any of them.

"I'm just leery about getting reimbursed on this money," he said.

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.