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Tuesday, August 18, 2009

Cash For Clunkers: The US Government's Biggest Cluster Flock

One local Dealership has sold 458 cars in July and are on schedule to sell some 500 cars in August.

However, of ALL the Clunker vehicles sold, only ONE, (1) has been paid for by our government program.

The Dealer is required to write "Junk Automobile Cars.Gov" on each title assuring the vehicle cannot be re-sold.

On the Governments own Website it clearly states each Dealer will be paid about 10 days later.

The Government put out a release today letting Dealers, (and others) know the program will continue, even on vehicles not yet manufactured.

Again, on another page they mention the fact that the Dealer will be paid in about 10 days.

While many Dealer Lots are now empty, vehicles in stock are already sold before they arrive.

Salvage Lots are picking up vehicles as fast as humanly possible but they are falling way behind the volume of vehicles being sold.

Many Dealers are scratching the heads trying to figure out why so many quality cars, trucks and whatever else you can find can't simply make it to the used car industry.

Clunkers as far as the eye can see, seriously! Each and every one of the vehicles you see here will be destroyed.

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.


Anonymous said...

What a waste. There are SO many people out there that could use these vehicles. Most are alot better than they have and most would take less gas than the car they are currently driving. To just destroy them is crazy.

Anonymous said...

Its a sham on the tax-payers and to just crush all of these so called clunkers is madness. Real men dont let other men(tax-payers) pay their bills for them. Thats not how I was raised.

10001110101 said...

Very informative article Joe. This has been a long time coming. The government again will be reactive to these ramifications. This should have been contemplated years ago. Closed minded, wasteful, immediate gratifed driven individuals running this government. Countries in Europe such as Germany have it all over us with this. There is nothing more sickening than seeing the stockpiled auto graveyards.

Anonymous said...

Joe, that's one of the best articles I've ever seen you publish. I'm dumbfounded.

Anonymous said...

America is DEAD, havent you all figured that out yet. Everything our parents and grand parents told us about work hard and be honest and life will work out is BULL-SHIT, I dont believe anymore as I stand here and look into the abyss. The goverment is controlled by corporate powers and they are evil and need to be smashed to pieces.

Anonymous said...

I find it sad that the dealers are being so screwed. I own a large business and I couldn't float a million dollars. I doubt my bank would loan it to me in this economy.

Anonymous said...

Joe, you would think that with an article that long, that both sides of the story would be told. Once again, another story full of misinformation. How many different dealerships did you interview about this? Which Cash for Clunkers government associate did you interview? Get out of your clunker and do your homework.

Anonymous said...

Great article, Joe.
We need to pass this on to our friends outside the area to get it a wide distribution.
I'm gonna click on the headline, then forward that link for this article (so they won't have to search for it two days from now) to a bunch of folks.

joealbero said...

anonymous 9:29, bitter, are we?

I used the government website to obtain information, shown in photos above.

I interviewed enough Dealers to secure my story.

I also debated the government site with the Dealers to assure the information was accurate.

Anonymous said...

I don't think that stretch black vehicle should have been accepted. No vehicles produced before 1984 are allowed to be accepted as a clunker.

joealbero said...

anonymous 9:40, is that all you've got to say!

Anonymous said...

Our government is deeply in debt. Our people are deeply in debt. Our economy is crashing because we can't service our debt. People are losing their homes because they can't pay their mortgages. People are bankrupting credit card debt. The banks gambled with our deposits and went belly up. Our government is printing money out of thin air.

The solution to these problems?

Encourage people who own cars which are totally paid to turn them in exchange for a new car with a loan.

Trade in cars with no debt for a new car with debt.

Create more debt!

Anonymous said...

Cash for Clunkers is a program to enrich the BANKERS.

Anonymous said...

i wonder what the repo rate will be one year from now? sjd

Anonymous said...

This pretty much sums it up for this entire administration. They actually believe they are doing something good that will be helpful but it actually hurts in the long run. There are a lot of used affordable cars that will be trashed now instead of going to a lower income family.

joealbero said...

Excellent point. I would have liked to ramble on more and more about the ramifications of the entire package but it would have been too lengthy. Hopefully comments bring out those additional topics.

Anonymous said...

Such a waste, some of those vehicles (such as the explorer pictured above) are perfectly fine and some needy family would kill to have them.

Anonymous said...

I have a daughter that just turned 17 and she would be tickled pink to have one of them. I could fix the breaks, shocks fluids wouldnt be the first time. Its a slap in the face, another one.

Anonymous said...

Just think that if the government took all the money they handed out to the car companies (that we will never see paid back), and gave it to the American people. That would have had a more positive benefit on the economy. They claimed the money was needed in order to keep these companies from going under. Yet, they still went bankrupt!! Maybe someone else can research it, but I think I heard somewhere that each US citizen could have received $25,000 if that money was given to the people. I'm not really for the government just handing out money people, but just think of all the mortgages that could have been saved, or all the cars that could have been purchased. The government has wasted an unbelievable amount of money trying to save the car companies and their unions.

doug wilkerson said...

Take a look at the BOX makers name, is that some sort of twisted irony or what.

dogg said...

lol...9:52 was thinking what I was thinking. I also need a new car, but really do not want to take on a new car payment. In a year, there should be plenty of deals around on 1 year old "new" cars that are being repossed.


Anonymous said...

Hey you liberals take a good look
at cash for clunkers and how the fast
the paperwork is going, just a preview of your new OBAMACARE paperwork will be processed SLOW to not being processed at all,and you gullible libs think government run health care is the way to go GOD help us all!!

Anonymous said...

Too bad the program wasn't just to trade in a vehicle to get a more fuel efficient vehicle. Then the dealerships would have used cars to sell to people who really need transportation.

Anonymous said...

What about all those small town repair shops that survive working on older domestic and import vehicles. I see their business drying up as the vehicles they rely on are taken off the road under this program. The clunker program will have a long term negative ripple affect on the economy for years to come. It will just close more businesses and put more people out of work.

Anonymous said...

I still think a clunkers for clunkers would be a good idea. If someone can trade in their really old clunker for a new clunker that gets better gas mileage it would help alot of people.

Anonymous said...

Car dealers: "The paperwork process is more complex than any program they had ever experienced."

Jump to the year 2012 (it's closer than you think) . . .

Parent: "Doctor, my daughter broke her arm."

Doctor: "Please fill out this 23 page government form and a health care case worker will evaluate it and get back to you to within 60 days."

Roger said...

So the salvage yard pays 100 bucks for some 2002 or better Explorer.....each damn taillight on that thing is worth 100 dollars on ebay and in the used market !!! The salvage companies are going to make a fortune !!! It says they can sell the parts if they choose to do so....Of corse they will...its a goldmine for them. And what about the small used car dealerships? All those cars now will not enter the used market, which will drive prices of used cars really high and people wont be able to afford them after this program is over. What a joke!!! It's just like the housing market....lenders telling people they can qualify for stuff they cant afford. When the feds dont pay the 4500 to the dealer then the dealer will go after the people for the money and it wont be able to go on the car note because their income wont allow them to qualify for the higher loan !! They shoulda thought it through.

Anonymous said...

Don't trust the government.

Anonymous said...

That is very disgusting. Many of those cars are in excellent shape and would do someone well at a reasonable cost. This is not recycling as they are advertising. Leave to Obama and the Obama loving liberals to F#&K up another government ran program. This is exactly why I don't want them messing with my health insurance.

Yesterday morning I heard an advertisement on WICO from a car dealer asking to you your used car to sell. I thought it was because they didn't have any new cars to sell because of this program. The reality is they aren't allowed to sell the trade ins. I believe that ad was from Courtesy. I would love to have that Brown Ford Explorer in the picture. This is a total outrage and something needs to be done about it. I am more concerned about the used cars going to waste than I am the greedy car dealers not getting paid. WTF!!

blutojthetotmom said...

I'm impressed,Joe.This post is long overdue because all you hear on the news is how successful this program is when the reality is that it is a boondoggle.
Some smaller dealerships opted out of "clunkers",Tawes Brothers GMC in Crisfield is a prime example,just was not worth the time and trouble for them because of their small inventory.How many other small town family owned car dealerships didnt participate?And they are the very ones who needed the help,not the "mega lots".
Alot of perfectly nice cars were destroyed and to me thats just insane.I am with Dogg on this one-sometime next year theres going to be some great deals on late model used cars to be had.People who do not even have jobs are rolling around town in new cars,its not going to be pretty.

Anonymous said...

11:48, you really don't know what you are talking about.
I have the guidelines for the junk yards and the vehicles are not to be parted out.
I'm not saying some won't try, but eventually they will get caught because the VIN #'s will be on a master list and won't match when they have to have their "salvage" vehicle inspected and ok'd.

Anonymous said...

We are ridiculously wasteful in this country. These are perfectly good cars- it seems that this program could have been better set up. As someone else here posted, there are lots of low income families that could use one of these clunkers. It makes no sense to junk cars that could still be driven. That Explorer looks newer than mine!

Anonymous said...

You have been misled by the dealers you have talked to,First of all they are sticking closer to retail pricing than ever before, secondly salvage yards and salvage auctions are p[cking up these cars and paying way more than one hundred dollars.Check it out at

Anonymous said...

Come on, the auto industry jumped on this faster than a buzzard on roadkill. They saw it as a quick way to make cash. HA! Wrong. And as everyone should know, but many obviously don't, if it sounds too good to be true, mostly likely it is. Look how long it takes to get an IRS refund. And THAT boondoggle didn't start with Obama. Stop blaming the current administration for all the woes in the world. Our US of A government has been a big ol' clunker for years, moving at a snail's pace. Maybe it will all crash soon and we can start over.

Anonymous said...

A dealer told me he has processed about 250 cars, and has received payment for 2.

He gets $200 from a salvage company.

Anonymous said...

I thought they could use the parts as long as the destroyed the engines. This program is a waste and if they are destroying the entire car and not using the good parts on it thats even more absurd.

Roger said...

10:05----You are absolutley correct. ABSURD !!!

4:59------and if you think for one second that salvage yards arent going to strip them down to the last bolt, you're nuts. So they dump some crap in the motor...the transmission isnt affected, and any used tranny on any market goes for 600 and up. A simple seat belt retractor will sell for 100 or more. I do know what I'm talking about my friend. Taillights, seatbelt retractors, radios, alternators, tires, etc etc not have any vin numbers on them. Nice try. Im sure that brown Explorer in the photos is worth a good 9 thousand bucks without the motor, parted out piece by piece. And if you know so much then post the info that you have for all of us dummies to see it.