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Car Dealerships Anxious About "Cash For Clunkers" Funding

Clunker

Update from the Associated Press(Friday, 8/7/09, 9:30 A.M.):President Barack Obama signed into law Friday morning an extension of the stimulus program that proved so popular it ran outof money.The Senate voted Thursday to triple the "cash-for-clunkers"fund to $3 billion and extend the program to Labor Day, assumingthe new money lasts that long. The law gives owners $3,500 to$4,500 for trading in old cars that use a lot of gas for newer,more efficient vehicles.

The “Cash for Clunkers” program, which the Obama administration engineered to help stimulate the car industry while getting gas-guzzlers off the roads, has hit a pothole. It was wildly popular in its first week, but it’s currently on hold while Congress finds out how much money has already gone out in the form of new cars. Meanwhile, local dealerships are standing by anxiously, awaiting word from Washington that they will be reimbursed for all the money they’ve shelled out through the program. KSMU’s Jennifer Moore visited a local dealership and has this story.

Here’s how the “Cash for Clunkers” Program works: you bring an old clunker in to a participating dealership. As long as the car meets certain qualifications—it’s less than 25 years old, it’s drivable, and it’s been insured and registered to the same owner for a year—you can get up to 4,500 dollars off of a brand new car.

The problem is: in its first week, the program was so popular, Congress is worried that its initial allocation of $1 billion isn’t going to cover all of the deals already made. The House has passed an additional $2 billion of funding, but the Senate has yet to vote.

In a conference call with reporters Wednesday, US Senator Claire McCaskill said she’s not sure she’ll vote “Yes” for the additional funding.

She said she still needed to find out how many deals are "in the pipeline," and that she wants to make sure both the dealer and the customer have certainty about their transactions.

This, in turn, has some car dealers worried. One of those Missouri car dealers who obviously doesn’t want to be left “holding the bag” is Randy Madsen, dealer manager of Don Wessel Honda in Springfield.

"The government owes me 300,000 dollars right now," Madsen said.

That’s roughly the amount his dealership has dished out in one week through the Cash for Clunkers program. He said there’s been frustratingly little communication from the federal government on whether dealerships should keep issuing the rebates, or hold off.

Madsen said his dealership has strictly followed the rules of the program, and that the only anxiety right now comes from the lack of communication from the government, as well as the fact that US dealerships have never participated in a program like this before.

We drive in a golf cart to the back of the dealership, where the clunkers hang out together like unpopular rejects. Most look driveable, some look pretty sketchy, and a couple show more rust than they do paint. But, Madsen says, don’t laugh too loudly: many of the cars’ former owners were quite attached to their old clunkers.

Under the program, the old cars must be disassembled and destroyed. Madsen says this dealership is recycling the shells of the cars.Senator Harry Reid, the Senate’s top Democrat, says he believes there’s a “significant majority” in the Senate that’s ready to move forward with the $2 billion of additional funding. But this dealership isn’t letting any more new cars roll off the lot through the rebate program until it knows how and when it will be reimbursed.

For KSMU News, I’m Jennifer Moore.

Randy Madsen, dealer manager of Don Wessel Honda in Springfield