Car dealerships across the country said the “cash for clunkers” program has been wildly popular but poorly managed, even as lawmakers rushed to pump $2 billion more into the program to triple its size.
With unexpectedly high demand threatening to drain the program months ahead of schedule, the House voted to approve the emergency cash infusion, passing it on a strong bipartisan vote on the last day before they left for a monthlong vacation. The Senate is expected to take up the bill next week.
The White House portrayed the need for action as evidence of success of the program in spurring auto sales.
“I’m happy to report that it has succeeded well beyond our expectations and all expectations, and we’re already seeing a dramatic increase in showroom traffic at local car dealers,” President Obama said. “It’s working so well that there are legitimate concerns that the funds in this program might soon be exhausted.”
But car dealerships said that the huge surge of interest has exposed a flaw in the payment structure of the Cash for Clunkers program that forces them to extend money up front to consumers and then hope the government pays them back, with a computer system completely unable to process the amount of claims coming in from dealers.
“The problems we’ve been dealing with the last day has very little to do with them running out of money. The problem is they don’t have any idea how many deals are in the pipeline because my dealers can’t even get into the system to submit the deals,” said Peter Kitzmiller, president of the Maryland Auto Dealers Association.
Since the program began last week, dealers have had a crush of buyers come to take advantage of the $3,500 to $4,500 in government funds available in return for the trade in of an older, gas-guzzling vehicle, which can be used toward the purchase of a new, more fuel-efficient car or truck.
But many dealers have yet to submit the bulk of their claims for reimbursement but have already handed out thousands or hundreds of thousands of dollars to prospective buyers. The reason for this, they say, is that the government is requiring as many as 20 documents to be submitted electronically on a system that is constantly crashing and kicking them off mid-way through a data entry process that is lasting at least a half-hour and often longer.
“What’s happening is that you’re a third of the way through and the system kicks you off,” said Mr. Kitzmiller, who estimated that less than 5 percent of the transactions done under the government program at the more than 35 participating Maryland dealerships have been sent to Washington for approval.
Michael Allen, spokesman for the Virginia Auto Dealers Association, said he had talked to one car dealer who “had gotten pretty proficient” at submitting the information for one of his transactions.
“He had gotten the process down to 40 minutes to enter one deal,” Mr. Allen said.
Many dealerships have had to bring employees in as early as 5:30 a.m. or keep them until late at night to enter in the information when fewer people are using the system.
“We’ve been impressed by the concept of the plan,” Mr. Allen said. “You just hope they can iron out these kinks and get the process streamlined.”
A White House official who commented on the issue on the condition of anonymity blamed “improper or incomplete entering of data” for “many of the delays” but said the government is taking steps to increase its capabilities.
“We plan to triple the number of people processing voucher applications and quadruple the number of people handling the Hotline, the computer system has bumped up its capacity and [the National Highway Traffic Safety Administration] is holding its third web seminar to walk people through the process of entering data early next week,” the official said.
It was first reported Thursday night that NHTSA was suspending the program, panicking dealers who suddenly feared they might not be paid back.
The White House contradicted NHTSA on Friday morning and tried to reassure car buyers that they could continue to take advantage of the program and dealers that they could continue to extend the offer to consumers and still expect to be reimbursed the $3,500 to $4,500 per vehicle.
“Dealers can be confident that the money is there to reimburse them,” said White House press secretary Robert Gibbs. “We feel confident that there is enough money.”
But one large Texas car dealer, who requested anonymity because he said he feared retaliation from the administration, said that after selling 40 cars under the program in three days, he stopped doing Cash for Clunker deals several days ago.
This decision was fueled in part when he saw the results of a survey of 2,000 dealers by the National Automobile Dealers Association. NADA found that roughly 25,000 deals had yet to be approved by the government.
There are an estimated 23,000 dealers participating in the program, and the NADA survey convinced the Texas dealer to stop selling cars under the program and prompted the government to send out its false alarm Thursday evening.
“We are still taking information and titles from customers. We’re not processing the transactions because we’re not sure if we’re going to get paid,” the Texas car dealer said. “I would want to see something in writing that says we are guaranteed to get paid.”
But Mr. Gibbs said he did not expect the Senate to act on the House bill until next week, leaving dealers to depend on the White House verbal reassurances.
One Maryland dealer, who did not want talk on the record, said that the state association was advising him not to do deals under the government program beyond Saturday.