cash for clunkers
After a day and a half of confusion surrounding the government's surprisingly popular "cash for clunkers" program, at least two things came into relative focus on Friday.
First, the White House has promised that the trade-in incentive program will continue through the weekend. Second, the measure has spurred auto sales beyond anybody's wildest dreams.
What remains fuzzy about the clunkers program is just about everything else -- how it works, how it will be funded, whether inventories will last and whether an overtaxed government bureaucracy can find a way to manage it more effectively.
"I don't think anybody anticipated this kind of volume," said Marty Collins, an executive with Group 1 Automotive, which operates 99 auto dealer showrooms nationwide. "The system wasn't built to handle it."
That became apparent Thursday evening when government officials threatened to shut down the program, formally called the Car Allowance Rebate System, after it had burned through its $1 billion in funding in less than a week.
News that the program was ending abruptly sparked a tidal wave of traffic in the nation's auto showrooms. By early Friday, the U.S. House of Representatives had rushed through $2 billion in emergency funding for a program of sudden political import.
The Senate plans to take up the measure next week, though observers expect more of a debate in that chamber over the program's economic and environmental value.
In the meantime, White House spokesman Robert Gibbs sought to reassure consumers the program will continue through the weekend.
"If you meet the requirements ... the certificates will be honored," he said.
The car-buying program, which began seemingly as an afterthought in the Obama administration's economic rescue plan, was designed to spur auto sales and further environmental goals by offering consumers incentives to trade in certain late-model used cars for more fuel-efficient new cars.
Payments top out at $4,500, but deals are better than that because automakers also are offering incentives. Chrysler has been the most aggressive, dealers say. It is matching the government's incentives, meaning a Chrysler customer can get about $9,000 off a new Dodge Caliber.
The clunkers program started July 24, and sales built steadily following auto industry advertising. It went into overdrive Thursday night when the administration threatened to cut it off.
Car shoppers flooded dealerships hoping to get in under the wire. Jim Vertucci, sales manager of Joe Rizza Ford in Riverside, said his team sold more than two dozen cars after the news broke and stayed open until midnight to wrap up deals.
Rob Crane, co-owner of Chicago's Napleton Northwestern Chrysler Jeep Dodge, said he sold $2 million of inventory over the week and is now tapped out. "I've got nothing left," he said.
So far the program has paid about $150 million to car dealers and reserved as much as $850 million more for pending applications, according to congressional aides. That brought the total dangerously close to the plan's funding limit.
Despite the administration's reassurances and the popularity of the plan, however, the auto industry is treading carefully. The National Association of Auto Dealers on Friday warned its members that making cash-for-clunkers deals is risky as long as the new funding is still hung up in Congress.
Already, dealers have stumbled into a thicket of problems.
For consumers, the deal is complete once they provide certain documentation and qualify for financing on the new car. For the dealer, who has to fund the $4,500 incentive until the government sends a check, closing a deal is just the beginning.
"The rules and regulations we got from the government are 136 pages long," said Dave Corradino, general manager of Terry's Automotive Group in Orland Park. "The government Web site has been down 95 percent of the time."
Dealers have to fill out forms, send in documents, make sure the bank financing clears and then go through an elaborate process to document that the car has been junked to avoid a $15,000 fine. The oil has to be drained, chemicals have to be poured into the engine to destroy it and then a scrap dealer has to certify that the car has been crushed.
Maria Villalobos, a Joe Rizza billing agent, said she managed to register only two claims in three days.
"It's horrible," she said. "You wait 20 minutes and then get 'page cannot be displayed.' I'm like, 'OK. What do I do now?' "
Of course, given the extreme industry doldrums, most dealers will likely keep cutting deals and hope for the best from Washington.
"We haven't been this busy in a long time," said Linda Adomaitis, a manager at Saturn of Tinley Park.
After a day and a half of confusion surrounding the government's surprisingly popular "cash for clunkers" program, at least two things came into relative focus on Friday.
First, the White House has promised that the trade-in incentive program will continue through the weekend. Second, the measure has spurred auto sales beyond anybody's wildest dreams.
What remains fuzzy about the clunkers program is just about everything else -- how it works, how it will be funded, whether inventories will last and whether an overtaxed government bureaucracy can find a way to manage it more effectively.
"I don't think anybody anticipated this kind of volume," said Marty Collins, an executive with Group 1 Automotive, which operates 99 auto dealer showrooms nationwide. "The system wasn't built to handle it."
That became apparent Thursday evening when government officials threatened to shut down the program, formally called the Car Allowance Rebate System, after it had burned through its $1 billion in funding in less than a week.
News that the program was ending abruptly sparked a tidal wave of traffic in the nation's auto showrooms. By early Friday, the U.S. House of Representatives had rushed through $2 billion in emergency funding for a program of sudden political import.
The Senate plans to take up the measure next week, though observers expect more of a debate in that chamber over the program's economic and environmental value.
In the meantime, White House spokesman Robert Gibbs sought to reassure consumers the program will continue through the weekend.
"If you meet the requirements ... the certificates will be honored," he said.
The car-buying program, which began seemingly as an afterthought in the Obama administration's economic rescue plan, was designed to spur auto sales and further environmental goals by offering consumers incentives to trade in certain late-model used cars for more fuel-efficient new cars.
Payments top out at $4,500, but deals are better than that because automakers also are offering incentives. Chrysler has been the most aggressive, dealers say. It is matching the government's incentives, meaning a Chrysler customer can get about $9,000 off a new Dodge Caliber.
The clunkers program started July 24, and sales built steadily following auto industry advertising. It went into overdrive Thursday night when the administration threatened to cut it off.
Car shoppers flooded dealerships hoping to get in under the wire. Jim Vertucci, sales manager of Joe Rizza Ford in Riverside, said his team sold more than two dozen cars after the news broke and stayed open until midnight to wrap up deals.
Rob Crane, co-owner of Chicago's Napleton Northwestern Chrysler Jeep Dodge, said he sold $2 million of inventory over the week and is now tapped out. "I've got nothing left," he said.
So far the program has paid about $150 million to car dealers and reserved as much as $850 million more for pending applications, according to congressional aides. That brought the total dangerously close to the plan's funding limit.
Despite the administration's reassurances and the popularity of the plan, however, the auto industry is treading carefully. The National Association of Auto Dealers on Friday warned its members that making cash-for-clunkers deals is risky as long as the new funding is still hung up in Congress.
Already, dealers have stumbled into a thicket of problems.
For consumers, the deal is complete once they provide certain documentation and qualify for financing on the new car. For the dealer, who has to fund the $4,500 incentive until the government sends a check, closing a deal is just the beginning.
"The rules and regulations we got from the government are 136 pages long," said Dave Corradino, general manager of Terry's Automotive Group in Orland Park. "The government Web site has been down 95 percent of the time."
Dealers have to fill out forms, send in documents, make sure the bank financing clears and then go through an elaborate process to document that the car has been junked to avoid a $15,000 fine. The oil has to be drained, chemicals have to be poured into the engine to destroy it and then a scrap dealer has to certify that the car has been crushed.
Maria Villalobos, a Joe Rizza billing agent, said she managed to register only two claims in three days.
"It's horrible," she said. "You wait 20 minutes and then get 'page cannot be displayed.' I'm like, 'OK. What do I do now?' "
Of course, given the extreme industry doldrums, most dealers will likely keep cutting deals and hope for the best from Washington.
"We haven't been this busy in a long time," said Linda Adomaitis, a manager at Saturn of Tinley Park.
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