Although the Cash for Clunkers program has created a significant influx in traffic for ailing dealerships, the risks are rapidly beginning to outweigh the benefits. According to well-publicized reports, the program has been an overwhelming success and consumers are blowing through the allotted $3 billion at an alarming rate. Dealers are selling a record number of vehicles and racking up rebate tabs in excess of $200,000, but cryptic problems with fund disbursement have prevented them from seeing a penny of it. Since the CARS program strictly prohibits dealers from delaying a new car purchase until the rebate is received, each new sale has morphed into a $4,500 dealership loan that many businesses have exhausted their working capital in order to float. Justifiably wary of shelling out any more cash in return for what is essentially a 6-figure IOU, many dealerships have opted to temporarily suspend participation in the program until they’re sure they will be repaid.
“They rolled the program out and told us we’d get paid in 10 days. It’s been three weeks,” said Jim Griffin, a Wisconsin dealer. “We need that money to pay our rent, to pay our light bill, pay our people.”