However, of ALL the Clunker vehicles sold, only ONE, (1) has been paid for by our government program.
My story begins with one local Dealership qualified to be a Clunkers Dealership. The paperwork process is more complex than any program they had ever experienced but detailed work is expected and they follow the guidelines very carefully. Many Dealers throughout the United States have been rejected after filing their documents and in return they get a slip telling them why and what they have to do to correct it.
OK, here's where one of the major problems begin, (out of many). If they fail to do the paperwork properly they then go to the bottom of the pile, some 300,000 transactions deep, if not more. One Dealer has sold close to 900 vehicles and even though they have been extremely careful in processing the paperwork they have only been paid back the $4,500.00 on ONE vehicle!
In fact, out of 300,000 vehicles already in the Clunkers Program, would you believe me when I tell you that the Government has only paid Dealerships throughout the United States on 1,600 vehicles, that's a fact!
While there are hours worth of paperwork on each deal, the Dealership is only paid $100.00 from the Government to process that vehicle. Once it has been accepted by the Government the Dealer is then required, (out of their $100.00 fee) to drain the oil completely. Start the vehicle with no oil in it and drive it to its final destination after the mechanic puts in "Liquid Glass" which is a silicon that hardens when it warms up and destroys the motor.
$12.00 goes to paperwork. $25.00 goes to mechanic and there's a $20.00 MDA Fee for each and every title. Clearly each Dealership is losing money on each and every trade. An additional $50.00 goes to the salvage yard for taking the vehicle away, (the Government pays out a total of $100.00 per vehicle).
In July one Dealer I spoke with sold 178 new cars. Since that time they have 3 deals that were approved/accepted but only ONE paid for. They have another 80 deals being submitted, so they have a total of 258 vehicle sold but only ONE has received the $4,500.00 payoff by the government.
When the government started this program they had absolutely no clue what they got into because the computer system they set up completely failed and they had to outsource the entire project. This is one of the reasons why many Dealers have not been paid back. However, the excuses are unreal.
I witnessed documents very carefully processed and one out of three was rejected because they government claims they didn't provide enough information. What's interesting about that is, out of the three deals identical to the other, two were accepted and one was rejected, all exactly the same. It now goes to the bottom of the pile and they start all over again.
One deal was rejected stating they couldn't open the JPEG File, yet the Dealer brought the same disk to three different computers and the files opened perfectly. Looks like that individual working with the government needs to reboot their computer!
So let's look at one of these Dealers numbers and see just how bad things really are. You see, if you're a small Dealership and you're not getting paid back, it's impossible to survive. Allow me to show you why.
Take the Dealer who sold 258 vehicles so far. At $4,500.00 per vehicle, they're out $1,296,000.00, minus the $4,500.00 they were paid for ONE vehicle so far. Now if any one of you think Dealers have that kind of money just floating around, well, you're nuts. Remember now, the new car sales were so dry 8 months prior to the Clunker Program, they were already in the hole.
So take some of the smaller Dealerships, (I'm not going to use names) and look how quickly they're all starting to hurt. The government stated, (above) that they would pay them back in around 10 days, yet only 1,600 vehicles have been paid for out of 300,000 sold and that was just the month of July.
One other interesting fact behind the Cash for Clunkers extension is, where did the money come from. Where did they find $2 Billion Dollars to extend the program. Would you believe the Environmental Protection Agency borrowed the $2 Billion Dollars and Congress/Obama took it from that agency to keep the program going!
OK, I'm bouncing a little bit but I thought you'd find that interesting. Have any of you ever been to Mannheim, PA? Mannheim has one of, (if not the largest) used car auctions in the country. They process 9,000 vehicles in one day, once a week, every week. Did anyone ever sit back and wonder what's going to happen to the used car market once they pull millions of vehicles completely off the market and junk them. I don't believe our government truly thought ahead on just how badly they're destroying that marketplace.
I know this Post is long but there's even more. GM and Chrysler have gone bankrupt, as you know. However, did you ever wonder how they will be able to buy parts from all of their outsourcing companies. Each GM Plant, (as an example) is simply an assembly plant. They don't manufacture brake lights, tail lights, headliners, the list is far too long to mention here but you get the idea.
Now, GM contacts one of the companies and says, we have more orders than we can manufacture at this point, we need 200,000 tail lights for out new Camaro's, we need this, we need that, etc.. What do you think that outsource manufacturer is going to tell GM after they just screwed that company out of $50,000,000.00 in bankruptcy. That's right, GM is already being told to go screw themselves.
While Cash for Clunkers said today it was now OK for them to sell vehicles under this program that haven't been manufactured yet, Dealers haven't been paid for all these used vehicles already traded in, there's nothing saying they'll ever arrive.
The used car market is screwed, Dealers aren't being paid for the vehicles traded in, Dealers are fronting hundreds of millions of dollars across the country in the hopes they'll get their money from the government and if the deal falls through because the vehicle just won't qualify because they Customer didn't own it for a full year, didn't have a registration for a full year, whatever the excuse is, Dealers will then be liable to go after those Customers to collect the $4,500.00. Fat Chance!
Let's say you purchased a new vehicle in this program. Each manufacturer is sold out of vehicles, (they are). The parts companies refuse to sell parts to these auto manufacturers, they, (GM or Chrysler) ultimately go belly up. Who's going to service and warranty your new vehicle? Where are you going to get parts?
If you get in an accident, who's going to replace the fender? That being said, what's going to happen to the used parts industry when all of these vehicles have been destroyed. Remember the $50.00 the salvage company was paid to take the vehicle. They then sell the scrap metal for around $400.00 per car. Not a bad days work, right. What happens if they in turn sell the scrap metal to China or Japan! Is there any regulations to keep the metal in the United States?
This program is a cluster flock any way you look at it. I'm told one of the smaller local Dealers had to stop selling cars in the program after 75 cars because their Bank told them they wouldn't finance another deal until they started getting paid for the Clunkers. Fat chance that's going to happen any time soon!
In 6 months the only US Auto Manufacturer left is more than likely going to be Ford. Chrysler is now offering up to $9,000.00 for a Clunkers deal. Mighty nice of Chrysler, (now owned by you and me) to pop up another $4,500.00 just to sucker people into buying something that probably won't have a place to get serviced in less than a year from now. So much for the warranty, right!
Someone wasn't using their head when they created this stupid program and in the end Americans will get screwed coming and going. I'm told, (by the way) the #1 vehicle being traded in is a Ford Explorer. The #2 vehicle being traded in is a Jeep Cherokee.
And our Government wanted to take on Health Care in this Country! They can't even get this program right. They'd have 350,000+ people a day being processed in Health Care. You think they'd pay the Doctors back within 10 days too!!!!!!!!!!!!!!!!!!
So why aren't you hearing about this throughout the Main Stream Media. Because our government wants these vehicles SOLD. They want to do whatever they can to get income out of these manufacturers to pay back all of the loans you and I fronted. However, there's a massive price to pay in the end IF these companies don't survive. Millions of Americans may own vehicles in which you cannot get services or repaired. It's a disaster in the making and in the mean time we ALL may be witnessing the end of the gasoline automobile.
Look, back in the day when people were using horse and buggy, everyone was saying the automobile would never survive. We may be looking at the alternative battery powered vehicle, fuel cell or whatever and saying, it will never survive. Remember, never say never.
CORRECTION: Out of the $100.00 paid out by the Government for the Clunkers, $50.00 goes to the Dealer and $50.00 goes to the Customer. The Salvage Yard pays $100.00 for each vehicle to the Dealer and they can sell parts on that vehicle, (should they choose to do so) for up to 6 months. That being said, when you can flip the vehicle for $400.00 immediately for scrap metal and not tie up space, the average business person would take the quick $400.00.