The cash-for-clunkers program could put a lot of dealers out of business.
Believe it or not, thats what a dealer in Ohio told me.
How is this possible? Everyone says the program is a good thing. Arent you selling more cars?
The dealer told me he has done interviews with his local TV stations and talked about how great it is for the economy that all those cars are being sold and how wonderful it is for the auto industry to have this kind of excitement again.
But he said the reality for some dealerships is different:
1. The kind of customers taking advantage of the cash-for-clunkers program tend to be the ones who pay cash, which means there is no additional dealer profit for arranging a loan.
2. The cars theyre buying are small ones -- i.e., cheap ones -- with not much of a margin, so dealers arent making much money on the sale.
3. Until the rules were changed over the weekend, dealers had to disable vehicles taken in trade before knowing whether the claim would be approved, which means dealers stand to lose money if the early sales arent approved.
4. There is no telling when dealerships will be reimbursed for the deals theyve booked.
The Ohio dealer told me hes not in any danger of going out of business, but he understands how other less-capitalized dealers could be in jeopardy.
He figures the government owes him nearly a quarter of a million dollars for the 60-plus cash-for-clunkers deals his dealership has written. Of those, a third of the clunkers were disabled by his dealership before the paperwork could be filed.
Even if the government accepts all the deals, the dealer worries that the programs response has been so big that the payments, which the government promised would be processed within 10 days, will stretch out for a month or more.
That will put dealers out of business, he said.
But Transportation Secretary Ray LaHood says the governments computers are fixed, which means the payments to dealers should start flowing out of Washington.
I guess we can stop worrying dealers going out of business.
After all, the checks are in the mail.