WASHINGTON -- Under the cash-for-clunkers program, dealers are not allowed to withhold delivery of new cars in stock while waiting for their rebate claims to be approved by the government, the Department of Transportation said today.
The agency asked customers to report any dealer that doesnt allow them to take possession of a new car before the dealer files for reimbursement.
Dealers are increasingly holding onto vehicles until they get repaid by the government for the $3,500-$4,500 credits they are providing to customers, said Bob Israel, president of the Louisiana Automobile Dealers Association.
Customers are not required to sign contingency agreements under which they would repay the credits to dealers if the rebate claims are rejected, according to revised guidance from the National Highway Traffic Safety Administration late this afternoon. Earlier, the cars.gov Web site said the accords should not be signed.
That guidance was a response to numerous customer questions about dealers use of contingency agreements, a NHTSA official who asked not to be identified said in an interview.
Such agreements are proliferating as dealers are subject to continuing delays in getting paid or in finding out whether their deals have been accepted, Israel said.
This new guidance is very, very unfair because its asking dealers to gamble, he said. Its a gamble that the government will reimburse dealers in a timely or correct fashion and that customers information is correct.
The government rebate should be considered part of the overall transaction, with the sale not completed until this rebate is made, Israel said.
The National Automobile Dealers Association plans today to question NHTSAs legal authority to issue that kind of guidance, NADA spokesman Bailey Wood said.
Dealers are simply protecting themselves, and theres nothing in the cash-for-clunkers law that prohibits them from requiring these agreements, he said.
Brad Wood, a dealer in Salisbury, N.C., said he is discontinuing participation in the clunkers program after reading todays guidance.
Theres all risk and very little reward, said Wood, a Kia, Chrysler and Honda dealer.
Wood, who is not related to the NADA spokesman, said he has $319,000 in claims still pending with the government -- some filed as far back as July 29. He has received only $26,000 in payments, he said.