Well, I’m not surprised: after all the hooplah surrounding the so-called economic stimulus effect of Cash for Clunkers, or C4C, auto dealers are quitting C4C. Many dealerships in New York and Maryland are saying "enough!" to the C4C program, due to problems getting reimbursements from the U.S. government.

The fact that many auto dealerships are quitting C4C is surprising, given that C4C was supposed to help auto dealers make some much needed cash. The idea was simple: the dealerships would take in beater cars, paying $3,500-$4,500 to the buyer so that he/she could then purchase a more fuel-efficient, and even more importantly, new car. The dealer would then submit a reimbursement form to the government, along with the necessary paperwork on the scrapped car, and be reimbursed for the $3,500-$4,500.

Unfortunately, as the poetic saying goes, "the best-laid plans of mice and men are generally about equal".

Auto dealerships typically run on cash. Because the C4C program depends on auto dealers first handing out cash vouchers to the buying public, and then getting the money back from the government, such a plan only works if the government makes speedy reimbursements. If not, the dealership becomes unable to advance more money.

When was the last time you saw the government getting "speedy" (aside from perhaps the IRS coming to get you for your unpaid back taxes)?

Many car dealerships are out of at least $1 million. If the government does not reimburse these dealers, there is very little to fall back on: the used cars that the dealers took in exchange for the vouchers have long since been destroyed, and cannot even be used for parts. Thanks to a government-mandated engine destruction process, the cars traded in for vouchers are completely useless now. Click here to read more about the engine-destruction process works.

So far, only about 3% of all reimbursement forms filed by auto dealers have been paid out. Some reports are circulating that many submitted forms will not be paid out at all due to many trade-in cars not qualifying for the C4C program.

Oops. I guess some of the car dealers should have checked the fine print.

Coming to the rescue of some of these dealers are the companies themselves. For example, GM is providing cash reimbursements to many dealers until the government finally (if ever) cuts them a check. Of course, it was the government that provided billions of dollars to GM in the first place so that GM could stay afloat (after which it still filed for bankruptcy). In effect, the money’s coming from the same place anyway.

Related Article:

Why Cash for Clunkers is a Waste of Money 

In Memoriam: A "clunker" Volvo fights for its life until the bitter end. If you listen well, you can actually hear the car crying.