U.S. allows clunker rebates on factory orders after dealer complaints
Chrissie Thompson
Automotive News
August 13, 2009 - 5:54 pm ET
The U.S. government has agreed to allow dealers to submit cash-for-clunkers transactions for vehicles ordered from factories instead of just those purchased at a dealership.
That decision came today from the National Highway Traffic Safety Administration in response to dealers' complaints about dwindling inventory on lots. The news came amid reports that the agency has rejected about 80 percent of cash-for-clunkers transactions.
Dealers who want to file deals for an ordered vehicle must first obtain the new car's vehicle identification number from a manufacturer, NHTSA said in a statement. Reimbursement requests still must have all required documents for the trade-in vehicle.
The announcement came a day after a NHTSA conference call with dealer group leaders. During the call, NHTSA officials said the government is rejecting four out of every five deals made under the incentive, according to three dealer group heads who listened.
In addition, NHTSA said dealers have only received payments for 2 percent of the processed voucher requests, said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers.
"Dealers cannot continue to operate without getting paid," Appleton said.
Even the dealers who have received some payments are "flipping out," according to Appleton. The payments that appear in their bank accounts don't indicate their corresponding transaction number.
"You just got $4,500, but you don't know for which deal," he said.
Karen Aldana, a NHTSA spokeswoman, said she couldn't yet confirm any news from the conference call.
Dealers must apply
The clunkers program gives consumers up to $4,500 for trading in gas-guzzling vehicles for replacements with better fuel efficiency. Dealers must apply for reimbursements for the consumer vouchers.
The widespread rejections are "an indication of a broken system," said Pete McNamara, president of the New Hampshire Automobile Dealers Association, who was also on the call.
"If 80 percent of your kids fail a test, that means someone's either not teaching you to write, or it's a confusing test," he said.
The government said the No. 1 reason dealers are seeing transactions rejected is they are not writing "junk automobile, cars.gov" on both sides of the trade-in vehicles' title, according to McNamara. Many dealers had thought they were following instructions to make sure the titles had a "label" when they affixed stickers with those words to both sides of the titles. But those stickers could be peeled off, so the NHTSA officials said dealers need to handwrite the words, according to McNamara.
"The advice to my dealers was, 'Break out the permanent marker,'" he said.
Dan Smith, NHTSA's associate administrator for enforcement, was among the agency officials on the call, said McNamara.
Reasons for rejection
Other top reasons for a deal's rejection included missing signatures on paperwork, absent proof of insurance for the trade-in vehicle or mismatched vehicle identification numbers for the trade-in.
A top 10 list is posted at cars.gov/dealersupport with explanations of how to avoid making a mistake on a transaction.
NHTSA rejected about 13,000 deals overnight for having at least three errors on their "summary of sale" form, McNamara said. Those rejections will not come with explanations of how the dealer erred.
"They just told us to have the dealers go through the whole thing," he said. "The dealer's got to start from scratch."
NHTSA, which oversees the $3 billion cash-for-clunkers program, said dealers have submitted 338,659 transactions into an online system. Those reimbursements would total $1.4 billion.
NHTSA officials told conference call participants they are increasing the number of people processing the transactions to 1,200 from about 200. The officials also said NHTSA is still seeking a way to wind down the program before funding runs out.
McNamara's suggestion? "Even if there's money left in the program, that's fine. Just don't let it run out and have dealers and consumers harmed at the end of it."
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