Auto dealers are being squeezed by an administrative logjam in the government’s Cash for Clunkers program.
The Cash for Clunkers program is generally a smart idea. People scrap their gas guzzlers and get $4,500 to put toward a more efficient vehicle. The program makes the auto fleet more efficient, juices sales (you can argue it’s only stealing sales from the future) and may get a few folks working again in the auto industry.
What’s not so smart is launching a program and not being able to execute on it. The Department of Transportation is overwhelmed with claims, according to various reports. On the bright side, workers are being added to process claims, but dealers still aren’t getting paid.
In Maryland alone, dealers have put in $36 million in claims under the clunkers program but have been reimbursed for only about 2 percent of the total, said Peter Kitzmiller, president of the 325-member Maryland Automobile Dealers Association.
NADA has stressed that the number one priority of the “clunkers” program is ensuring that dealers are reimbursed in a timely manner for pending deals. The U.S. Department of Transportation (DOT) is aware that many dealers have hundreds — and in some cases thousands — of “clunkers” applications pending that are worth hundreds of thousands or millions of dollars.
The rush of automotive sales activity brought on by the “Cash for Clunkers” program is fading fast, according to Edmunds.com, whose latest study of car buyer behavior indicates that automotive purchase intent is down 31 percent from its peak in late July.
Simply put, the Cash for Clunkers program is the equivalent of a sugar rush—the buzz may wear off quickly. And if the government can’t process applications it’s going to hurt the cash flow of many auto dealers.
Some infrastructure tweaks and retooled business processes may be in order to speed things up.