By on August 20, 2009

Would you believe that two-thirds of all car dealers are still waiting for their first clunker check? Could you imagine that only three percent of all clunker deals have been been blessed by NHTSA? Automotive News [sub] has the survey for you! The only problem is that AN admits the poll was unscientific. Plus, it was an online poll. Still, the headline looks good beneath a headline in which NADA admonishes that dealers are “at risk” in making further clunker deals. And NADA’s internal surveys show that all the clunker money is already gone, reinforcing the apocalyptic tone of the AN survey.

“It is important to note that NHTSA has confirmed elsewhere that if the program’s money runs out before a dealer is reimbursed, that dealer will not be paid,” NADA warns. “Dealers who accept additional ‘clunker’ deals face a growing risk that they may not be reimbursed.” The implication is that the NHTSA is so completely out to lunch that it’s putting dealers at risk. Meanwhile, NHTSA is blaming the high rejection rate on dealers’ inability to fill out forms properly. And if rejection rates stay high, dealers won’t have to worry (as much) about the money running out. Of course the possibility that the money is almost gone could also bring in the stragglers, hoping to get in on the clunker deal at the last minute. Unless NHTSA comes up with a wind-down strategy fast, overspending is a real possibility. You have to know that some entrepreneurial lawyers somewhere are getting ready to have a field day with the CARS program.

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31 Comments on “Dealers Call Out Cash for Clunkers...”


  • avatar
    KalapanaBlack

    Listen, I’m no fan of dealers. And the way they’ve hopped on this bandwagon. But it’s so far within the realm of possibility that the government completely dropped the ball on this that it’s hard for me to fault the dealers in this case.

    Rejections might be overwhelmingly due to improper paperwork coming from the dealers, but I can’t even fathom how complicated the paperwork from the government on this handout is. Furthermore, I never once heard of any training done by the government to ensure dealers could even basically fill out the papers properly. So, well, I’m with the dealers that have pulled out of these shenanigans.

  • avatar
    dwford

    For NHTSA to create a program like this that is so poorly run they don’t know how many applications they have or how much money is left, then to hang the potential financial loss on the dealers is ludicrous! They just need to pick a date and say all valid applications sent in by that date will be paid out.

    As for the dealers, with the complete lack of professionalism and attention to detail most salesmen and manager have, it’s not surprising that so many applications are being rejected for errors. If the dealers can’t get the paperwork right, then I don’t feel much sympathy for them.

    At my store, we have the salesman, the general manager, and the finance manager each review the paperwork before delivery. We haven’t had our office staff (notorious nitpickers) kick back one deal for errors sales have missed. So hopefully with 4 levels of checking, we won’t have problems. Still, of the now 70+ cars we have delivered, we have only been paid on ONE so far.

  • avatar
    superbadd75

    If the paperwork is straightforward, and the dealers are negligently filling it out incorrectly and/or fraudulently, then they deserve to not get paid. That being said, what government paperwork is actually straightforward? This has more likely than not been botched by the idiots at NHTSA, and will wind up with thousands of car dealers getting screwed by the whole ordeal. There will most definitely be some Attorneys getting involved in this mess before it’s all said and done. Another government scheme gone awry.

  • avatar
    dwford

    The paperwork is really not that hard. You need a valid title, proof of registration for at least the past year (the current and previous registration will do), proof of continuous insurance for at least the past year (current card and previous card should work), and the CARS comparison from cars.gov showing the trade and the new vehicle. The dealer takes the mileage down from the trade when the customer brings it in for delivery.

    We have had some issues with customer’s names being misspelled on the reg or title, and have had to do some legwork to get the insurance proof squared away, but the only people we have had to turn away are those who’s trade didn’t qualify. It really isn’t that hard to get this right..

  • avatar
    26theone

    The government is supposed to be adding an additional 700 employees this week to handle processing of the rebates. I dont think they would be doing that if it was only a dealership problem…

    http://www.huffingtonpost.com/2009/08/17/obama-administration-to-t_n_261646.html

  • avatar
    John Horner

    Oh, pity the poor dealers who are suddenly selling many models for full MSRP instead of having to discount them. And, what about all those customers who found out they didn’t qualify for a clunker voucher but still bought a new car anyway.

    Also, all of the major manufacturers have announced that they are fronting their dealerships money to get them through the cash flow gap until the government pays out. No, I’m not going to link the news stories. Do a little research folks.

    Bitching and moaning all the way to the bank. Typical of the Automotive News crowd. With all the apocalyptic stories of scads of dealers opting out of the program, I wonder why all the dealers around here are still advertising it heavily? Show me the big banner signs saying “Sorry, We Don’t Do Cash For Clunkers”. Even the picture chosen to accompany this story is of a dealer promoting the program.

  • avatar
    dcdriver

    Let’s look at it another way, if not for C4C, these dealers would have a bunch of unsold inventory on their lots and a lot less cash on hand. OK so the reimbursements are taking a little longer than they’d like, but at least they’ve actually sold some cars, at least the salesmen are busy and not taking naps all day.

    They should be very very thnakful for C4c. The main reason why it’s taking so long to get the money is because its actually working to get people in the showrooms to spend money and move inventory. Would they rather sell less cars and get their reimbursement money sooner?

  • avatar
    eastaboga

    C4C along with CAFE standards are still attempting to incentivize the wrong side of the equation. A gas tax would solve both issues, though I don’t see any elected official sporting the political deathwish it would take to grab that third rail.

    Dealers will maximize the CHCC benfit to them while complaining about it the entire time, I know I used to work for one, and OEM sales incentive plans have prepared them well for this government largess.

  • avatar
    psarhjinian

    If the paperwork is straightforward, and the dealers are negligently filling it out fraudulently and/or incorrectly…

    I spent a year and a half working on a project to simplify and electronically deliver forms because the error rate on paper forms is terrifying.

    Basically, there were two problems:

    One, people who fill out forms have poor communication skills. I don’t think people who write well can fully comprehend how very, very bad the vast majority of society is. Between (not) reading instructions for use, having poor penmanship, bad spelling, or scratching/editing, most forms are not well filled out.

    Two, people who re-key them are just as bad as the people filling them out. Think about the literacy rate among entry-level paper pushers: on text-heavy forms, these people effectively double the error rate, or cause high degrees of rejection.

    By moving to electronic forms and, more importantly, reducing text input wherever possible and using checkboxes, search-able lists and drop-downs we were able to cut pretty much an entire thirty-person clerical department who did nothing but re-key hundreds these forms. Oh, and we cut processing time from two weeks to four hours. Heartless, but these people ought to have been working somewhere else where literacy was not a requirement.

    Now, think about your average dealer salesperson or clerical staff’s literacy. In email correspondence with these people, I typically see reams of misspellings, inaccuracies, bad grammar, inability to answer questions (because they cannot or do not read what I’ve written) and what looks like third-grade command of the language—and these are people who aren’t ESL and who would, if you spoke with them, seem reasonably erudite.

    And that’s in email, where you have the benefit of language tools; in handwritten communication these people are far worse. Combine that with the kind of people who crunch forms for the government and the text-heavy nature of the form and you can see why this is a problem.

    And this is all before we even get to deliberate fraud…

  • avatar
    Robstar

    psarhjinian>

    Well written!

    IMHO paper forms should seriously not be considered for anything government.

  • avatar
    murphysamber

    as a sales manager who has had to suffer through this mess, I can’t imagine why any dealer would want to commit fraud. The customer doesn’t get screwed, the dealer does. Who in their right mind would want to screw this up. Thankfully, we haven’t seen many rejections. But the handful we have, they have rejected because THEY couldn’t read the forms provided by the state (registration) and insurance companies. even still, less than 2% have been approved for payment. sure, everyone hates dealers. But who’s to say that your business doesn’t get roped into a similar progam someday. We knew it would be a disaster, just not this bad.

  • avatar
    Vorenus

    Hold on… So you’re saying that it takes the US Government a long time to do something?

    Shocker.

  • avatar
    dwford

    In my limited experience in the auto industry – 2 dealerships, the office staff has been the lynchpin of the operation. Both store I have worked at have had a long term office manager and a couple of key employees that all took their job very seriously and did a thorough job. Owners realize that the back office staff will make or break a store, and they are treated like gold. At my old store, the office manager even got a demo! At my current store, the office manager has the owner’s ear, and can basically get anyone including any manager fired at any time. She basically runs the place. Needless to say our clunker paperwork is top notch before it gets to her.

  • avatar
    The Walking Eye

    psarhjinian:

    I was just thinking why is this not more automated on the forms? We have these things called computers that are pretty good for that sort of thing and are more than just apparatuses for tweeting.

  • avatar
    fincar1

    I would suspect that the main reason this is not more automated is basically that the whole program was pulled out of someone’s ass, and that someone on the operating end was given about thirty minutes to design all the necessary forms.

  • avatar
    dwford

    This really isn’t automated at all. We have to scan all the documents and email them, but it is really still an old school process of looking at manually created documents in digital form.

  • avatar
    no_slushbox

    -Does the C4C law guarantee payment within a certain amount of time?

    -Does the C4C law guarantee payment if the allocated money has run out?

    I’m guessing the answer is no on both counts. Dealers should have been more careful about letting emotion cloud their judgment in participating in C4C.

    Dealers, of all people, should have known to read the small print. They didn’t, they just rushed to give away taxpayers money. Now if they don’t get reimbursed then, as dealers are used to saying, not my problem.

    And the same for the buyers that signed paperwork saying they would reimburse the dealer if their C4C application was rejected. That’s what you get for trying to take $4500 in taxpayer money for your $800 POS.

  • avatar
    jkross22

    The commenters lamenting the lack of automation for C4C makes me laugh. Did you guys think there was going to be ANYTHING efficient with this crap policy? Seriously, this program has been garbage from the moment pen hit paper, and this gov’t payout foot dragging is yet another example.

    When we hear the gov’t was hiring more people (I’ve heard as few as 700 and as many as 1000) to help process paperwork for this program, the message was clear: No one thought about any of the downstream needs until the dealers started running around with their hair on fire.

    Any ideas on how much more this program will cost if you’re hiring 700 people you didn’t budget for?

    And the dealers are huffing and puffing about not getting paid! Who do they think they are? GM??

  • avatar
    rochskier

    Anyone else remember the scene in Fargo when Bill Macy scrawled VINs with a really dull pencil on the forms he was faxing to GMAC?

    The C4C process sounds a lot like that.

  • avatar
    dwford

    The real problem for the dealers is that they have no way of knowing when the government will run out of money. If I write a deal today and deliver a car, but it takes 3 weeks + to get even an approval, it is a huge risk for the dealer to even write the deal in the first place.

    Should the dealers just bail out now and wait for all pending submitted deals to be paid out, or rely on verbal promises from the government that the deals will be paid?

    I think in the end the government will just set a date the program ends and agree to fund all conforming deals submitted by that date. And if it goes a little over budget, so be it.

  • avatar
    ruckover

    Fincar1 is correct. I do not think we should be quick to blame those in the trenches, either the government or the dealerships, for this mess. Thank the representatives who passed this so quickly that no planning was done.

    While we dog those “lazy, fat, ignorant” governmental workers and we question the basic honesty of dealerships, imagine if your business was told to create a new program in which tens of thousands if not hundreds of thousands of new files would be coming in, on top of all your normal workload, and this would be happening in a matter of weeks. I am just guessing, but I would imagine that all of us would experience some difficulty under these circumstances.

  • avatar
    psarhjinian

    C4C along with CAFE standards are still attempting to incentivize the wrong side of the equation. A gas tax would solve both issues, though I don’t see any elected official sporting the political deathwish it would take to grab that third rail.

    C4C is very different from CAFE; the “green” slant is just window-dressing.

    Unlike CAFE, which is designed to address fuel economy, insulating us from peaks and dips in price (and has done a bad job of it), C4C is designed to stimulate sales during a downturn, borrowing them from a period of good sales in hope of creating an average of acceptable sales, and thusly jobs. It’s purpose is to smooth out economic dips and peaks.

    In that sense, C4C and it’s international cousins seem to be working quite well. We have people back in the job market and we have dollars flowing by borrowing from the future. This isn’t a bad thing: borrowing from a future, overheated economy helps prevent the trough that will thusly succeed it.

    There’s a knee-jerk tendency to think that any intervention in the market is a bad thing, and that’s an overreaching assumption. What you want in an economy is a slow, gentle cycle, not an out of control roller-coaster, exhilarating as it may be.

  • avatar
    Hippo

    In the free market the dealer and the freeloader are on opposite sides of the table and it somewhat holds fraud in check.

    With C4C they both want the gov money. Fraud has to be massive especially with the über desperate domestics. Now they want to extort payment before verification.

  • avatar
    psarhjinian

    I was just thinking why is this not more automated on the forms? We have these things called computers that are pretty good for that sort of thing and are more than just apparatuses for tweeting.

    Do you want to know the answer to that? Ok, here goes…

    The reason is because the people who design these processes, both in government and in business, are not the people who are bound by it. There’s a certain mentality among upper-level managers that you can wish your will into reality by issuing a memo or policy document. These are the kind of people who will cheerfully implement a twenty page form because they have people under them, making a tenth or less of their salary, to fill them out.

    If they acknowledge IT at all, they’ll usually half-ass it with something like Acrobat forms that’ll end up getting rekeyed into a database anyway. They do this because they see the bill for a proper, secure, informatically-sound database front end and don’t see the advantage—again, because they’re not the ones who have to fill it out.

    The other reason is, of course, lawyers (and to a lesser degree, certified accountants). Lawyers love paper because it gives the impression of permanence.** Lawyers and people who act like them are also the kind of people who do not do trench duty managing forms: they just make their clerks do it.

    ** I had a long and painful debate with a law firm about using 4096-bit, PKI-signed and encrypted document exchange versus faxes with signatures and/or couriered mail. He insisted faxes were more secure “because they’re paper, and they have a real signature”, despite that the electronic solution would either require a literal quantum leap in technology, or a few billion years of processor time. These are the kinds of things that make systems analysts drink on the job.

  • avatar
    psarhjinian

    The commenters lamenting the lack of automation for C4C makes me laugh. Did you guys think there was going to be ANYTHING efficient with this crap policy? Seriously, this program has been garbage from the moment pen hit paper, and this gov’t payout foot dragging is yet another example.

    This is not a government thing. Any entity sufficiently bloody-minded, public or private, who values the process over the results and whose leaders are problematically abstracted from the enterprise, will inflict this kind of shit on people.

    Do note that “Office Space” is not based on a government organization, and that anyone who has done hard time at a bank, professional services, health informatics or legal firm can attest to the bureaucratic logjam they’ve often dwelt in.

    I would suspect that the main reason this is not more automated is basically that the whole program was pulled out of someone’s ass, and that someone on the operating end was given about thirty minutes to design all the necessary forms.

    This is almost assuredly true. C4C (unlike the German program) has all the hallmarks of something designed by higher-ups who don’t have time (and don’t have to deal with) details.

  • avatar
    Bearadise

    Hippo opined: “Now they want to extort payment before verification.”

    If your employer didn’t pay you for an extended period merely because a piece of data was missing in the payroll system, wouldn’t you still expect your paycheck when it was due? Wouldn’t you still expect it while they try to find the missing paperwork? Yes, you would. Is that extortion? No, it’s not.

  • avatar
    John Horner

    “I was just thinking why is this not more automated on the forms?”

    One problem might be that the required insurance and registration documentation is generally not available to the public or the government is electronic form, and certainly not in a way which is standardized amongst the many states.

  • avatar
    Odomeater

    This program has amounted to a administrative nightmare for auto dealers. Not to mention a severe blow to cash flow with the tremendous delay in funding.
    And you want the Gov involved in healthcare?

  • avatar
    Hippo

    Bearadise.

    You are right, I would want my money.
    But your example is not an accurate comparison. My employer would have the time sheets and he would know that I have done the work. We know each other well.

    Doing business with the public at random in a society as corrupt as the one we live in now, no one would deliver a product or pay for anything unless every T is crossed and every I is dotted and verified three times over. Every one knows odds are that a random unknown counter party is most likely pulling something.

    This is not the country we used to live in, where the overwhelming % of people proceeded in good faith even when dealing with strangers.

  • avatar
    John Horner

    I can hardly wait for the dealers to scream that the program needs to be brought back now that we know it will be over this coming Monday.

    Cue dealer whining on 3, 2, 1 …..

  • avatar
    50merc

    Ruckover said it well. NHTSA had roughly a month to research (e.g., what engine-killing chemical would EPA and recyclers agree with?), develop and implement a rather large-scale program.

    A more automated process may have been considered, but in my experience when you ask IT for a system you’re told “we’ll get back to you in six months.”

    I think the importance of verifying a claim demanded a “paper trail” of supporting documents. From dwford’s comment, I gather the “paper” is an e-mailed electronic image, which serves the purpose.

    And I can understand why lawyers like paper. In archives, courthouses, museums, etc., there are records and books that go back many hundreds of years yet are still readable. I found a will written 200 years ago by an ancestor, and the text and signature was as clear as the day the paper was written upon. In contrast, an archivist told me his institution was stymied by forty-year old Dictaphone belts and thirty-year old computer tapes in obsolete data formats.

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