A simple program costing $1 Billion.
Not a fifth of the entire US economy like health care.
Just a simple little (dumb) idea to use taxpayer money to buy up a couple hundred thousand working used cars before poor people can get them.
The result? Utter chaos. And quick action to increase the size of the program by 200%
Even the NYTimes has to say:
Things sound like a total mess in the showrooms.
“There is absolute frustration across the board. As of this morning, they’re not really confident about any deals, and no one can give them advice about what they should be telling their customers.”
One thing still not clear is how many older cars have actually been sold and scrapped with the original $1 billion, and how many more the new $2 billion will be able to cover. The government Web site where dealers are supposed to register their deals has been crashing, and the dealers haven’t been able to plug in their information.
So here is one question: With the program now on shaky ground, even with a new infusion of money, what consumer and what dealer will risk rendering an engine irretrievably unusable? Well, as it turns out, a lot of them are doing so, because unless the dealers can prove to the government that they have killed the engines and scrapped the cars, the government will not reimburse them for the $3,500 or $4,500 discount that they have given the customer on a new, more efficient vehicle.
The general manager of DCH Paramus Honda, told us he was owed more than $80,000, and he wondered if he would ever see it. The government has said it would take 10 days to reimburse the dealers, but that was before the program apparently ran out of money and devolved into chaos Thursday night.
“Oh my God, what a mess today,” Sally Ann Maggio, who co-owns Hackensack Auto Wreckers, also in New Jersey, said on Friday. Ms. Maggio said she generally makes her profit by reselling the engines, the most valuable parts of the cars she takes, but that’s not posible with the cars coming to her because of the cash for clunkers program, because they have been rendered unusable. That cuts down the salvage value of the cars — and the incentive for salvage yards and wreckers to take them — to almost nothing, considering the time and energy they must spend in going to the dealer, towing back the dead cars, removing the engines, crushing the bodies and shipping them to a metal scrap shredder and recycler.
Dealers are “hitting the panic button” today. “We have been overwhelmed with phone calls from the dealerships,” she said. They have already killed the engines, and want her to pick up the heaps. And on hearing the news that the government might be pumping more money into the program, she said, they are stepping up the process. “They’re worried that the new money might last only two days,” Ms. Maggio said. “But until it’s scrapped and the paperwork is done, it’s not a done deal,” she said. “They’re driving me crazy.”
Mr. Kurkin, the lawyer in Miami, said that many dealers are attaching clauses to their sales agreements, saying that if the government money does not come through, the customer will have to make up the difference.
“If a dealer doesn’t have a separate document addressing this possibility, the dealer will likely have to eat it,” Mr. Kurkin said. “I certainly see a lot of litigation over this.”
“If a dealer doesn’t have a separate document addressing this possibility, the dealer will likely have to eat it,” Mr. Kurkin said. “I certainly see a lot of litigation over this.”
