April 23, 2018
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Dealers wary of ‘clunker’ solvency

Contributed | BDN
Contributed | BDN
Reflected in the window of a "cash for clunkers" trade-in truck, Rick Varney of Varney Buick Pontiac GMC in Bangor is among the dealers who have suspended their participation in the federal program less than a week after it started. Designed to revive sluggish auto sales and replace older vehicles with more fuel-efficient models, the Car Allowance Rebate System, also known as CARS, has been so popular with consumers that its $1 billion budget may already be close to exhaustion. (Bangor Daily News/Kate Collins)
By Nok-Noi Ricker, BDN Staff

BANGOR, Maine — Some local car dealers who have sold vehicles this week under the “cash for clunkers” program are worried that they might be left holding the bag, and are no longer offering the federal rebate.

Others are continuing to offer the rebate but are placing buyers on a waiting list, and at least one local dealership has chosen not to participate at all.

The Car Allowance Rebate System, or CARS program, roared out of the gate a week ago, and within four days the $1 billion set aside to fund it was essentially spent. About 40,000 vehicle sales nationwide were done through the program, but dealers estimated they were trying to complete transactions on an additional 200,000 vehicles, The Associated Press reported Friday.

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Facing a possible suspension of the program Thursday, the U.S. House of Representatives, including Reps. Mike Michaud and Chellie Pingree, D-Maine, on Friday approved an additional $2 billion to keep the program going. The Senate is expected to take up the measure soon.

“It’s not a perfect program, but because of the overwhelming demand and the direct benefit to consumers and our economy, I believe the program deserved an extension,” Michaud, who co-sponsored the original bill, said Friday.

The House shifted unused stimulus funds to provide the additional $2 billion, Michaud said.

“This is a smart program that will help grow our clean-energy economy, cut down on pollution and save money at the pump as we reduce consumption by over 250 million gallons of gas,” Pingree said. “It goes a long way towards getting Americans back to work and behind the wheel of a cleaner, more environmentally friendly car.”

The cash for clunkers program was approved by Congress last month and provides either a $3,500 or $4,500 credit to customers who trade in their old gas-guzzlers for new, more fuel-efficient vehicles. Dealerships began posting applications for the rebates on the government Web site Monday as they sold cars under the program.

“I have about 40 of them out right now that haven’t been paid for and haven’t been accepted,” Rick Varney of Varney GMC on Hogan Road in Bangor said Friday. “Once you’re accepted, you’re basically guaranteed the money. All of ours are pending.”

The Hogan Road dealership is waiting for between $140,000 and $180,000 from the federal government.

Because they have not been paid, “we’re not doing any [rebates] currently,” Varney said. “It’s not worth selling a car and eating a $4,500 rebate.”

If for some reason the applications for the program are rejected, “I eat the money,” he said, but added, “I think we’ll get paid.”The very popular program also caused the government Web site set up to process the applications to crash on numerous occasions, adding to the frustration, he and other local car dealers said.

Varney and his employees were at the business until 11 p.m. Tuesday trying to post the applications and until 9 p.m. Wednesday, he said.

Kevin Kelley, spokesman for U.S. Sen. Susan Collins, said in an e-mail that dealerships need not worry — the checks are in the mail.

“The Department of Transportation has assured Sen. Collins’ office that any dealer who has submitted the necessary paperwork for reimbursement will be paid,” he said.

Jay Darling, president of Darling’s Bangor Ford, said about 70 cars or trucks have been sold under the program and all of his applications have been sent, but are pending.

“At this point the dealerships are on the hook,” he said. “The government is saying if they’re submitted, they’ll get paid. I think eventually it will get ironed out.”

Bangor Ford is waiting for between $245,000 and $315,000. Until the funds begin to roll in, the dealership is placing people on waiting lists, Darling said.

“Cash for clunkers is still on, [but] we’re not delivering vehicles under it,” he said. “If customers are willing to get in the queue, they’re in line for it.”

Brian Geaghan, sales manager for Down East Toyota on Wilson Street in Brewer, said the dealership decided not to participate.

“When the program was wheeled out it was pretty obvious to us that it was terribly underfunded,” he said. “We thought it was best to not get involved with something until we got a clear picture. And quite frankly, once we got a clear picture, we liked it even less. We see this as a customer relations nightmare.”

He added later, “Our basic fear is that we just wouldn’t get paid.”

By not participating, “we took a fairly large gamble,” Geaghan said. “We could have easily sold 100 cars — easily. It puts you in a tough spot.”

A big factor in the decision not to jump on board was ensuring customer satisfaction remained high, he stressed several times.

Sens. Collins and Dianne Feinstein, D-Calif., urged the U.S. Department of Transportation on Friday to provide Congress with a detailed evaluation of the effectiveness of the CARS program.

“We will insist that any extension of this program require that the minimum fuel economy improvement for newly purchased vehicles be at least two miles per gallon higher than it is under the enacted Clunkers program,” a joint statement from the senators said. The rules now require that a new vehicle purchased under the program averages at least 22 mpg if it’s a passenger car, and at least 18 mpg for pickups, minivans and SUVs. The average combines city and highway gas mileage as rated by the Environmental Protection Agency.

In order to qualify as a “clunker,” a vehicle must have been rated by the EPA as averaging 18 miles per gallon or less in combined highway and city driving when new.

The EPA late last week released revised mileage figures that changed the eligibility—pro and con — for more than 150 models, according to the Wall Street Journal. The Transportation Department said this week that clunker deals made on or before the July 24 date of those EPA revisions will be allowed to go forward, even if the car is no longer eligible.

Collins and Feinstein also would like to see the program expanded to include the purchase of fuel-efficient used vehicles.

One problem with the original $1 billion in funding is that it covered grants for only about 250,000 cars, said Darling.

With an average 900,000 cars sold monthly nationwide, Darling said, the funding offered only about “a 10-day supply. So it wasn’t really going to go far.”

In that scenario, the additional $2 billion won’t last long.

Consumers can find details about the cash for clunkers program — including the 136-page formal rules governing such issues as whether customers have to pay sales taxes on the clunker-voucher amounts (which vary by state) and how dealers have to disable vehicles and scrap them to receive their money — at the government’s www.cars.gov site.

Writer Joseph B. White of the Wall Street Journal contributed to this report.



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