Still waiting to get paid

Published 10:29 pm Tuesday, August 25, 2009

For a few weeks, it has all been about making deals and selling cars.

But for Suffolk automotive dealers who participated in the federal government’s so-called “Cash for Clunkers” program, right now it’s all about waiting for the money.

On Monday, government officials cut off the $3-billion program, which paid consumers to trade in older, inefficient vehicles for newer ones that get better gas mileage.

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Area automotive dealers said they were glad for the traffic the Car Allowance Rebate System brought to their showrooms, but they were also wary of calling the program a complete success just yet.

“Other than not getting paid for anything, yet” the program has been a boon to his company, dealer Mike Duman said Tuesday. “We did sell some cars, but we haven’t been paid for any.”

Duman said his salespeople in Suffolk and Franklin had made 48 deals based on the CARS program. With each of those deals representing a rebate of up to $4,500 off the already-thin profit margins on the vehicles, the dealership actually found itself accepting less money from the customers for new cars than it had paid for them — sometimes thousands of dollars less.

As long as the government pays dealers back as promised for the rebates — and soon — car dealers still will make money from their Clunkers deals.

Effectively, dealerships have been floating the U.S. government an interest-free loan on every Clunker turned in for a rebate.

“As long as everybody gets paid, I don’t think it will be a problem,” Duman said. “We’re rolling the dice, but it’s too early to panic.”

Eley Duke, vice president of Duke Automotive Group, said some dealers could find themselves in jeopardy if the government drags its feet paying up for the deals.

“Dealerships are very cash-starved operations,” he said. “If you take eighty or $90,000 out of the operation, it has a big impact.”

Duke Automotive, he said, was able to use its reserves to fund the CARS program deals in anticipation of the government paying back the money. Other companies without those reserves could find themselves in trouble if there are problems with the payments.

In fact, he said, his own dealership stopped making Clunkers deals last Tuesday, after an alert from the National Automobile Dealers Association warned that the program might be nearing the point at which it was overcommitted.

His company has received government rebate reimbursements for just three of the 20 or so deals it made under the program, Eley said, but all of its claims had been submitted and were pending on Tuesday afternoon.

A rush of dealers across the nation trying to submit last-minute claims before the original deadline at 8 p.m. Monday crashed the computer system that had been set up to handle the job. The deadline was extended to noon Tuesday and then again to 8 p.m. Tuesday.

Duman said he wouldn’t have been surprised if the claims deadline were extended yet again.

“There’s going to be a huge influx” of last-minute claims, he said.

Both men questioned how much thought had gone into setting up the CARS program before it was launched. Confusion among customers, problems with claims procedures and worries over slow reimbursements all could have been alleviated with better planning, they said.

But both agreed that the program had been a positive factor at their dealerships this summer.

“I think it was great to help stimulate the economy,” Duke said. “I’m happy to see people out there buying cars.”