Cash For Clunkers Program Suspended After Only A Few Days. Here Is Why

The Cash For Clunkers program has only been active since last Friday, but word is now leaking out that the CARS program will be halted at midnight on Thursday July 30th, less than a week after it launched.  The problem?  There are fears that the program may have already run out of money.  The program was to run until November 1st, or until the funds were depleted. It appears the funds have been depleted! From Fox News:

The government plans to suspend its popular “cash for clunkers” program amid concerns it could quickly use up the $1 billion in rebates for new car purchases, congressional officials said Thursday.

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The Transportation Department called lawmakers’ offices to alert them to the decision to suspend the program at midnight Thursday. The program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle.

The congressional officials spoke on condition of anonymity because they were not authorized to speak publicly. Rae Tyson, a spokesman for the National Highway Traffic Safety Administration, which administers the program, declined comment.

So it seems that the program has been either been much more successful than anticipated, or the government bureaucracy is just too slow to keep up with all of the deals that dealers are sending their way. 

Congress last month approved the Car Allowance Rebate System program, known as CARS, to boost auto sales and remove some inefficient cars and trucks from the roads. The program kicked off last Friday and was heavily publicized by car companies and auto dealers.

Through late Wednesday, 22,782 vehicles had been purchased through the program and nearly $96 million had been spent. But dealers raised concerns about large backlogs in the processing of the deals in the government system, prompting the suspension.

A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.

“There’s a significant backlog of ‘cash for clunkers’ deals that make us question how much funding is still available in the program,” said Bailey Wood, a spokesman for the dealers association.

So now that the Cash For Clunkers program is suspended, a lot of people who thought they had time to do a deal may not be able to cash in.  The question now is, will congress allocate more money for the program so that more people can take part? Was it successful enough, and did it have the effect that they were hoping?

Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote in a letter to House leaders on Wednesday requesting additional funding for the program.

“This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn,” Miller said Thursday. “The federal government must come up with more money, immediately, to keep this program going.”

Brendan Daly, a spokesman for House Speaker Nancy Pelosi, D-Calif., said they would work with “the congressional sponsors and the administration to quickly review the results of the initiative.”

General Motors Co. spokesman Greg Martin said Thursday the automaker hopes “there’s a will and way to keep the CARS program going a little bit longer.”

Friday morning there is already talk of Congress passing a 2 billion dollar extension to the cash strapped program, and the White House is saying the program will be available at least through the weekend. Read details of that here.

Now that the program may be extended – the question remains. Should it be?  There are already reports of dealers having huge problems getting CARS deals approved, some even being rejected for silly reasons – when the clunker cars have already been destroyed.  That means many dealers will be losing money on those rejected deals because they can’t sell the destroyed cars.  Add to that the fact that the program is a bureaucratic nightmare – with the government not approving deals  in a timely fashion, the government website constantly going down – and the dealers are now extremely worried about cash flow problems.  All of that means you have the making of a huge fiasco.

What do you think? Will the government pass legislation assigning more money to this program?  Will they find that the program has had the stimulating effect that they were hoping?  Is this program just another way for government to waste our money, and will it end up being more trouble than it was worth? Tell us what you think in the comments!

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Last Edited: 11th February 2014

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  1. says

    I was JUST noticing that several of the dealerships that I had bookmarked during a new car search last week had raised their prices – some rather considerably. I guess that the response was huge, and they recognized that folks were more focused on the $4500 than on the original MSRP. The government really shouldn’t be involved in this in the first place, so, hopefully the whole program just stays dead.
    NCN´s last blog ..Keeping A Close Eye On Those Medical Bills

  2. says

    I would expect that the program will be reinstituted quickly. It’ll likely go past November 1st too and maybe become permanent in one form or another. Once a subsidy, always a subsidy.

    That’s how it worked in the mortgage industry, and you see where that took us…

  3. says

    From a policy perspective, the program worked as it intended. It stimulated the auto industry; it helped sell over 20,000 cars. It can be argued all day long whether the intentions were good or not, but i can’t say that this is anything but a policy success. I think the government is just shocked at how quick of a success it was.
    Brian´s last blog ..From Red, to Black, to Red Again – My Net Worth

    • says

      There is a debate on edmunds.com about whether or not a lot of those cars might have sold anyway, with or without the program. Obviously more have sold with the program, but many believe it isn’t the exponential increase in actual buyers that many think. Add to that the debate behind whether or not this should have been something we pay for in the first place. But from the standpoint that it sucked a lot of people in to buy new cars – yes, i think it did succeed.

    • says

      If you believe reports like this one, the program’s problems only begin with the funding. Car dealers are reporting huge cash flow problems now because they are approving the CARS deals, but the government has yet to approve them. Tons of paperwork, government websites not being able to handle traffic, and other bureaucratic problems are causing this problem to be a huge problem for many dealers. Read about it and watch a video talking to local MN car dealers here. Hopefully this program won’t have the effect of causing some dealers to go out of business?

      By the way, the house has approved $2 billion more for the CARS program. HERE

  4. says

    “But from the standpoint that it sucked a lot of people in to buy new cars – yes, i think it did succeed.”

    I couldn’t agree more Peter!
    Also if the program helped 20,000 people, even if they gave $4500 to each of those that only comes to 90 million. I heard the program planned to use 1 billion of stimulus money. What happened to the rest? Does that go into the Congress slush fund?
    Brad @ enemyofdebt´s last blog ..Government Reliance Vs. Personal Responsibility- Wait Or Create?

  5. says

    A monetary give away will always “succeed”. We could be looking at the beginnings of the next public fiscal runnaway train. The real question is will the auto industry be able to function without it going forward.

    Look what happened in housing when 100% financing went away. Now they’re trying to restore it through the $8000 any buyer credit. And there’s a push to increase it to $15k.

    The real question is, is any of this right from an individual standpoint? Unless you’re paying cash for your new car, you’ll probably increase your debt load to make the deal.

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