Cash for Clunkers Part II- It’s All Clunked-Up

Just yesterday I wrote about the government program CARS- better known as “Cash for Clunkers,” and no sooner did I hit the old “submit” button to the blogsophere; well, the proverbial shit just about hit the old radiator fan. 

Hours later there were reports that the administering NHTSA changed some of the combined fuel ratings for a handful of cars; basically, making some prior deals involving cars (I’m not sure which ones) null and void.  In order to get the rebates, the old clunker had to get a combined EPA rating of 18 miles-per-gallon or less.  Cars rated 18 mpg or less were now not deemed a “clunker” putting the deals in jeopardy.  The government...  "Takes it back."

I heard of some people getting notices from the dealers (who actually fronted the rebates) to either come-up with the additional $4,500 they thought they would get from the government; or turn-in their shiny, brandy new car they had taken home just a few days prior.  These were cases, of which, last I heard were “under review.”  Never a good thing.

Wednesday night I did some investigating. 

I went to my favorite local car dealership (names and brands un-important) and struck-up a conversation with my good friend the general sales manager- the “desk guy.”  These people actually like it when talking to them doesn’t involve squeezing every last penny out of a deal (that really isn’t realistically there); so, when they’re not working, working hard for your money (read, to get your money), they’re an honest bunch.  Really. 

Bottom line he, the manager had nothing but kind things to say about the program.  “Sure, it’s gotten people in the door, but what a f’n nightmare…” His words, not mine. 

“The paperwork is crazy, they got you jumping through all these hoops…  It’s total a fiasco.”  A fiasco.  I’m not surprised.  But the car business thrives on this kind of stuff- some would even call the car promotions business “controlled chaos,” at least it should be if it’s done right.  And that’s just what “Cash for Clunkers” is proving to be.  Chaotic.

I learned some finer points about the program that aren’t clearly drawn-out on the extensive national websites and the myriad of car commercials, flooding the national TV and radio slots.

As described in my prior blog, the money to the buyer is an instant rebate fronted by the car dealerships to be later reimbursed by the NHSTA/US government upon paperwork processing (yes, the paperwork is proving to be a nightmare, but it’s the government, do you expect it to be pleasant?)  What they don’t advertise is- and this is fairly obvious to those in sales- the rebate is taxed- so, you’re going to pay the sales tax on the $3,500 or $4,500, okay, that’s not all-that bad.  But here’s a kicker- the dealer principal, the owner who fronted the rebate money, basically out of his pocket, is actually getting paid back, but taxed from the government as if it were income.  To my un-accountant-ass, this sounds like a bit of double taxation?  Or even if it’s not technically- the government is making out quite well giving away money as part of a “stimulus” package. 

So, the state governments are making out- they’re getting their taxes from the consumers, and the state and federal government is getting their money out of the dealership owners’ pockets.  Draw out your local tax books, and you do the math. 

None of this really surprises me, but it does further reinforce my adage about sales, and the government for that matter- “they get their pound of flesh…”

But here’s a fun tidbit about the CARS program- dealers are instructed to destroy and disable the clunkers before they’re towed-off the lots.  (Clearly, someone in Washington has a brother-in-law in the wrecking business, because these guys are going to make-out like bandits!) but disabling involves either running silica (like a sand slurry) in the engine to grind it to a halt, or simply draining the oil and revving the mill till it blows-up.

I immediately quipped “can I do one… please…” with a gleam in my eye not since seen since Tom Green in Road Trip, asked Mitch the python to “unleash the fury.” 

Okay, back to business.  According to reports published Thursday night (tonight, just hours ago!)- the government plans on halting the CARS program, amid concerns that the program may be running out of money too quickly.  As of midnight tonight, the program is stopped- till someone puts the oil back in.

The Associated Press reports- through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent- about a tenth of the billion they want to spend till November 1.

“But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting the suspension…  A survey of 2,000 dealers by the National Automobile Dealers Association (NADA) found about 25,000 deals had not yet been approved by NHTSA, or nearly 13 trades per store." 

The report raises concerns “with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.” 

Clearly- the government had overestimated the dealers’ ability to push paperwork.  If you’ve ever seen the paperwork required to put a car on the road (or take it off) you wouldn’t be scoffing.

So, as I write to you all about this- the car manufacturers are still inviting, over the radio and television, to come in, buy a more fuel efficient car and get a load of money for that load of crap you call an old clunker.  

You have about two hours to do so.  You better hurry.  Because like everything else- “it’s for a limited time only.” 


(Since I published this post- the White House has stepped-in at the eleventh hour; and while not declaring the program "suspended," it's currently "under review..."   Buy, sell, trade your clunker at your own risk...)


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