LaHood: 'Clunkers' May Hit Scrap Heap This Week

Aug. 2, 2009— -- Without additional funding from Congress, the popular Cash for Clunkers program could perish this week, Secretary of Transportation Ray LaHood said on C-SPAN Sunday.

"If the Senate does not pass the additional $2 billion then the program will be suspended," he said, referring to the cash infusion passed quickly by the House on Friday to keep the cash-strapped program afloat.

He said that anything already in the pipeline would be paid, adding that "there will be a good faith effort" to reimburse dealers for cars sold Monday.

Lahood also expressed confidence that the Senate would pass the funding needed to keep the car incentive plan going.

"We will continue the program until we see what the Senate does," he said. "I have great faith that the Senate will pass this."

This weekend, the program's financial limbo spilled into showrooms across the country, as potential car buyers wondered if they were eligible for the program and if the program still existed at all.

Car dealerships coast to coast braced for crowds, but instead they were hammered with questions.

"We got a lot of phone calls about 'are we on, are we off, you guys still doing the program?'" said Alex Valencia, a car salesman with a Nissan dealership in Fairfax, Va.

The program offers owners rebates of up to $4,500 if they trade in their gas-guzzling cars for a new car. The program has been so successful that the $1 billion allocated by Congress last month ran out within a week, as auto dealers began filing for reimbursement.

Cash for Clunkers Requirements Unclear for Potential Customers

Although the House of Representatives quickly passed legislation Friday, July 31, 2009, to add $2 billion in funding to the cash-strapped program, the Senate has yet to approve the bill.

The White House has assured dealers that they will be reimbursed for any deals closed over the weekend, but, in the meantime, car dealerships that continue to offer the government's incentive are doing it on faith.

As for the customers, some are finding the program requirements difficult to decode.

Robert and Rebekah Jarman of Lynchburg, Va., drove three and a half hours to a Nissan dealership in Fairfax, Va., to trade in their 1999 Buick Regal for a new fuel-efficient car. But when they arrived at the showroom, they found out their car was not eligible.

"We had thought it qualified based on the qualifications on the Web site, but come to find out we just missed the mark just by a couple miles," said Robert Jarman.

Still, the program is working for many Americans. Officials estimate that more than 250,000 cars have been sold as a result.

Car Dealerships Wrestle With Processing Sales

Despite the program's success, car dealerships are finding that it's not an easy one to navigate.

"The program has been working tremendously well. We just enjoyed a record month in several of our dealerships. We're happy with the underlying theory of the program," said David Rosenberg, owner of Prime Motor Group in Massachusetts. "In practice, it's very difficult to administer."

Across the country, dealers reported problems accessing the government Web site intended to help process sales. The site couldn't keep up with the deluge of processing requests, they said.

Despite those issues, the number of sales continued to mount.

Even though some of the dealerships owned by Rosenberg's group hadn't even registered for the program, he said, through Saturday morning, they had sold more than 200 cars.

Assuming the program gets its $2 billion infusion, Rosenberg said the government already owes his group between $800,000 and $900,000.

"We know the program is working, and we believe we will eventually get paid," he said. "Question is, how long is it going to take for us to get paid."

Industry Group Urges Caution

In a statement on its Web site, the National Automobile Dealers Association (NADA) said it appreciates the administration's effort to continue the program, but it advised dealers to proceed with caution while the additional funding remains in limbo.

"NADA aggressively supports such additional funding and is working to secure it," said NADA chairman John McEleney, who is also a multifranchise dealer in Iowa. "Moreover, NADA has been given specific assurances by the Administration that all transactions consummated through today will be honored based on their belief that sufficient funds remain available.

"Nonetheless, until further definitive guidance on the availability of funding is provided by the Administration, dealers who accept additional 'clunkers' deals may face a risk that they will not be reimbursed," the statement read.

One of NADA's suggestions was for dealers to take deposits in lieu of consummated sales, "with an eye toward legislative success next week."

But Saturday on "Good Morning America Weekend," LaHood adamantly defended the program and encouraged Americans to head to the showroom.

"Go out and buy a car," he said, expressing confidence that the Senate would pass the legislation to secure an additional $2 billion. "This is a lifeline to the industry. … Anybody that says this is not working doesn't know what they're talking about."

'Cash for Clunkers' Guidelines

Here's how the "Cash for Clunkers" program works:

People who owned a car made in 1984 or later that got 18 miles to the gallon or less could qualify.

The car had to have been registered and insured over the past year, and it must have been able to start.

If applicants to the program traded their clunker for a car that got four more miles per gallon, the government gave them $3,500.

If the new car got 10 miles more per gallon, the person got $4,500.

People trading an SUV, minivan or small pickup only had to improve their mileage by 2 to 5 miles per gallon.

The vehicle purchased had to be brand new and cost less than $45,000.