One day after the National Highway Transportation and Safety Administration (NHTSA) proposed suspending the popular Cash for Clunkers program, the House of Representatives voted to allocate another $2 billion for the program. The Senate will vote on this plan on Monday.
The problems came when, four days after the official kickoff, the NHTSA estimated that most of the $1 billion originally allocated had been used. They got this number from the National Auto Dealers Association, who had polled its member dealerships. This points to a major flaw in the Cash for Clunkers program. There is no way for the NHTSA to know how much money has been spent.
Dealerships sell cars right now, on the spot, giving buyers credit for the $3,500 or $4,500. The buyer drives off in their new car and then the dealership submits for reimbursement. No one will know when the money runs out until the last dealerships are left holding the bag. This is compounded by the fact that the processing is very slow. Many dealerships are still in the process of getting certified to participate in the program. Meanwhile, they’re holding on to submissions for sales that took place as far back as July 1st.
If Congress approves the additional $2 billion, the Cash for Clunkers program can go on for while longer. But the problem will still exist when the funds start to get depleted. They need to come up with real-time, electronic submissions so that a dealership will know whether funds are still available.
In the meantime, if you’re hoping to get in on this spectacular deal, go shopping this weekend. Car dealerships are planning to take advantage of the proposed $2 billion increase before it runs out!
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