As We See It

Cash for dealers?

The federal program to jump-start the auto industry still carries many question marks

After a balky start filled with filing delays and $1 billion in federal money that was spent much quicker than anyone anticipated, the Cash for Clunkers program, in which people can get a rebate of up to $4,500 by bringing in old junkers, may be back on track.

Dealers along the Valley Automall in Henderson are all reporting an uptick in business of at least 10 percent. Even people whose clunkers don’t qualify for the program are still buying cars. With an extra $2 billion coming down the pipe, it looks like the program will help quick-start the ailing automotive industry. That is, if the dealers get paid.

As Courtesy Imports President James Mooradian is happy to demonstrate with help from a yellow legal pad, it’s not as if the government has been throwing its money away. That first billion? He draws out estimates of money the government has earned: sales taxes on hundreds of thousands of new car purchases, motor vehicle registration fees on same, FICA withholding on salesmen’s commissions, even “mistakes” that dealers will inevitably make that the government won’t have to reimburse them on. His ballpark figure is $700 million.

Two questions remain. One: Will Uncle Sam pay back the dealers in a timely manner? The federal government has 10 days to start paying dealers back once paperwork has been filed. By the time you read this, the first checks should start pouring in from Washington. But at the moment none of the dealerships in the Automall have gotten paid, and they have their own expenses to manage. It may only be $4,500 a car, but when you sell 40 or 50 cars, it starts to add up.

“That,” says Mooradian, “busts most businesses when they have to do that kind of float.”

Two, more direly, perhaps, is what happens if the program runs out of money as dealers are continuing to submit paperwork on cars they’ve already sold? Hopefully that question will never have to be answered.


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