Today, the extremely popular vehicle exchange program “Cash for Clunkers” will complete its tenure. “Cash for Clunkers,” a.k.a. the Car Allowance Rebate System (CARS), introduced by the U.S. Government in late July, is a $3 billion cash incentive program.
The program allowed consumers to trade in their fuel-inefficient vehicles for efficient ones. Customers received rebates of between $3,500 and $4,500, depending on the improvement in fuel efficiency from their old vehicle to their new one.
The surge of applications under the program saw dealers run out of stock for popular models, such as Ford Focus, Honda Civic, Toyota Corolla and Nissan Altima. As of Friday, August 21, about half a million cars – worth about $2 billion – had been sold through the program.
However, the sales under the program left many dealers worried about not getting reimbursed by the Government. As of August 21, dealers had been reimbursed for just a small fraction of the billions in sales. About 40% of the claims submitted have been reviewed, but only 7% of the claims have actually been paid.
These had led many dealers to stop Cash for Clunkers sales prematurely, either to make sure the Government reimbursed them for the rebates or because their stocks of eligible cars had dried up.
On August 22, the nation’s largest auto dealership chain AutoNation (AN) withdrew from the program to make sure it could submit the paperwork on thousands of sales to the Government before the deadline. The dealer has alone sold 11,000 cars under the program as of August 20, and has estimated that the Government owes it $45 million.
Cash for Clunkers has generated a huge response since its inception. Ford (F) witnessed its first sales gain for July since November 2007 due to the program. Several automakers have increased production in response to the demand generated by the program. These include Ford, General Motors, Honda Motor (HMC), Toyota Motor (TM), Hyundai Motor and Chrysler Group LLC.
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