Dealers holding the bag for Cash for Clunkers

Cars moving; checks aren't

Staff WriterAugust 20, 2009 

There's just one thing missing from the Cash for Clunkers program: the cash.

A paperwork logjam has prevented auto dealers from receiving reimbursements from the federal government, and many have had enough. Local dealers say the delay is causing a cash-flow crunch, and some are no longer participating -- despite the fact that it brought people back to showrooms.

"We have sold more cars clearly than we would have without this program," said Bill Musgrave, owner of eight Saturn dealerships in the state, including those in Raleigh, Cary and Durham.

Musgrave said that he has done 40 Cash for Clunkers deals and has yet to be paid for any.

"To me, we have 40 bad checks out there, and we're having a bad time collecting."

On Wednesday, U.S. Transportation Secretary Ray LaHood assured vehicle dealers that they would be paid.

"They're going to get their money," he said at a news conference in Washington. "We have the money to provide to them."

Earlier this week, the department said it was tripling the number of workers for the program.

Nationwide, dealers have submitted 411,624 claims totaling $1.72 billion as of Tuesday, according to the U.S. Department of Transportation, which oversees the program. North Carolina dealers have submitted claims for $42.5 million.

Dealers are right to be frustrated, said Jessica Caldwell, auto industry analyst for edmunds.com.

People are worried that the limit has already been reached and that they won't get paid for the deals they've made, she said.

Still, Caldwell added, "this program definitely is helping dealers out, and that's something they should realize, too."

Until they start seeing checks, many dealers remain skeptical.

At the Leith Group, 400 Cash for Clunkers cars have been traded in, said Keith Elks, spokesman for the Raleigh auto dealership chain.

So far, the company has received payment for four, leading the Leith Group to "pause" its participation in the program. Elks wouldn't say how long the dealership would "pause" the program.

"No one has been able to give us any idea with any certainty on any of the questions we have regarding funding or even in their processing," he said. "We're not getting any information."

Universal Chevrolet in Wendell has accepted 20 clunkers, amounting to about $75,000 the dealership is owed, said Jim Gardner, the general manager.

"We can't keep going without getting paid for some of these units," he said. "Obviously it's helped business so you can't have crocodile tears. However, the repayment process has been totally insane."

If necessary, Universal Chevrolet could tap its line of credit, Gardner said, though that defeats the purpose of helping bolster dealer profits.

"The going [interest] rate is 4 percent," he said. "That in itself on this type of money gets to be an amount that we just can't carry." For customers, dealers' declining participation is confusing.

Will Compton of Apex tried to take his 1992 Chevy Blazer to both Sanford Ford and Leith Auto Park in Cary. At both, he was told they were no longer participating in the program.

Compton said he has sympathy for the dealers but wishes they'd be up front.

"They don't tell you right when you walk in. So you spend your half an hour or hour on the sales pitch, and then they say, 'Oh, we're not doing it.'"

Still, determined customers can find dealers offering the credit. Compton is driving to Greensboro to get the deal done.

"For that much money, sure."

sue.stock@newsobserver.com or 919-829-4649

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