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Officials continue to battle issues as CARS program nears end

November 15, 2010
The federal official overseeing the Car Allowance Rebate System said in an Aug. 19 Webinar that payouts to dealers began en mass after his agency corrected a problem which, in an attempt to streamline the process, made matters worse.

"Thousands of payments have been made either yesterday, today or tomorrow," said Frank Borris of the National Highway Traffic Safety Administration. "We’re sorry that happened. We apologize for the delay."

Borris spoke as part of a fourth installment presentation on the CARS program, this one with tips on inputting successful transactions. Borris recognized dealer concerns about the program and said the program also has been "enormously frustrating" for his agency to wade through the mountain of claims. He said the review staff has been quadrupled and that the NHTSA is "pushing as hard as we can on our end."

The Obama administration indicated it would announce by Aug. 21, after this newsletter’s deadline, how it would wind down the popular Cash for Clunkers program and when the incentives will no longer be available. "We want to make sure that dealers know when we’re getting close" to running out of the money that was allocated for the program, Transportation Secretary Ray LaHood told reporters Aug. 19.

LaHood said he recognized that "dealers are frustrated. They’re going to get their money." Borris said the government would honor all deals that are consummated before the program’s end.

Dealers have complained of delays in getting their reimbursements approved, causing a cash crunch for their businesses. Dealers typically borrow money to put new cars on their lots and must repay those loans within a few days of a sale.

"We do not know how many deals are in the pipeline. We don’t know how many dollars are left in the program at this very moment," said Kevin Mize, chairman of the Chicago Automobile Trade Association. "That’s fundamental to the health of the dealerships that are participating. If you run out of money before you run out of deals, that’s not a good situation."

Some dealers are no longer participating in the CARS program. The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said about half its 425 members had left the program because they cannot afford to offer more rebates.

Melanie Bible, spokeswoman for the Pennsylvania Automotive Association, also estimated about half of the state’s 950 dealerships have stopped cutting new "cash for clunkers" deals.

In the NADA presentation, NHTSA’s Borris identified the top reasons that dealer invoices are rejected:

• Missing or improperly marked "Junk Automobile," on the title. The statement must be prominent but it should not obscure the owner’s name or the VIN.
• Missing documents
• Missing signatures
• Mismatches between VINs on the various documents in the submission

Two dealers who have experienced modest success at getting reimbursed for their CARS claims joined the presentation. Scott Addison and Kevin Reilly said rejections often are not the fault of the dealership.

For instance, Addison said that signatures plainly apparent on Page 2 of a document likely were not seen by the auditor because the auditor did not scroll to look for the second page.

"The reviewer should stop and ask a supervisor for help," he said. "Two minutes to do that now would save 45 minutes later to re-review the whole deal."

Another common rejection comes from the failure to prove insurance coverage for the previous 12 months. Reilly said it is best for dealership staff to obtain that when the customer is present because insurance agents can be reluctant to provide that directly to the dealership.

For Wisconsin residents, for whom vehicle insurance is not mandatory, a note can be scanned with a simple statement: "Insurance not required in this state."

CARS procedures have continued to evolve since the program’s July 24 inception. Beginning Aug. 22, a dealer can cancel a transaction that had already been submitted. Previously, a dealer could cancel it only if it was in a saved mode or if NHTSA had rejected it. Dealers now can self-reject a submitted deal. It would return to the dealer’s work list, whereupon it can be edited or removed from the system.

Before Aug. 22, a dealer could appeal to a burdensome e-mail address to kill a deal. One area dealer said he did just that Aug. 13. The NHTSA granted his request—eight days later.

Borris said another common mistake comes from misidentifying the vehicle categories—passenger car or category 1, 2 or 3 truck—and indicating two-wheel drive instead of four-wheel drive. A shortcut from wading through long lists of models: add the percentage symbol in the search, as in %Ford%Unlisted%.

Dealers, said Addison, should never rely on a single employee to review the many documents for errors. "Have as many eyeballs as possible review the documents. It’s a tiring process. If you have only one person doing it, errors are likely."

The most effective attached files, said Reilly, are black and white pdf documents with 200 to 300 dots per inch. Documents that are saved in color or as jpg files increase file sizes and make submission more difficult. Files also must be named properly, according to NHTSA’s user guide.

The financial arms of several automakers have begun offering help to cashstrapped dealerships, in some cases by floating loans to help cover clunker-related shortfalls.

Toyota Financial Services is offering loans to dealers for up to 60 days to cover the lag between a dealership’s payment and its reimbursement. The financial-services arms of Honda, Nissan, Ford and other automakers are offering similar programs.