That's right, the program that will cost the federal government at least $3 billion is actually hurting the businesses it was designed to help. Why? Because the government messed it up.
Initially, the program sparked a buying spree by folks who traded in their clunkers for a $3,500-4,500 credit on a new vehicle that gets much better gas mileage. It worked out well for consumers, but the government has only reimbursed the auto dealers for roughly one out of a hundred clunkers. Keep in mind that the auto industry, which includes dealers, was struggling so much that Congress spent $3 billion on a program designed to help.
So much for that idea. After the initial jolt of buying prompted by the program, dealers discovered the government was in no hurry to reimburse them for the old vehicles. The Sinclairs have about 200 clunkers on their property. The government has reimbursed them for 2.
Dan Sinclair estimates the dealerships have roughly $800,000 tied up in the program with no idea when the government will reimburse the cost. The result? The Sinclair dealerships have suspended their participation in the program. They just can't afford it anymore.
The Sinclairs have a common tale. Dealers across the country are beginning to put the squeeze on politicians to fix the program, free the cash and give it back to the dealers who are on the hook.
Question is: Can the dealers survive another dose of government assistance?