Most Maryland auto dealers participating in "Cash for Clunkers" have yet to be reimbursed by the federal government, raising concerns about the financial pressure the program is putting on dealers.
Meanwhile, the U.S. Department of Transportation said it is working overtime to process an overwhelming number of claims and trying to make sure that taxpayer money is paid out only for legitimate transactions.
The Car Allowance Rebate System, better known as Cash for Clunkers, offers $3,500 or $4,500 to consumers who scrap a gas-guzzler and buy a more fuel-efficient new vehicle. The program kicked off July 24 and was so popular that it ran through its $1 billion in funding after about one week. Congress quickly passed legislation to provide an additional $2 billion.
Dealers essentially front the money for the cash incentive, and the government promises to reimburse them. In the first three weeks of the program, dealers submitted 358,851 reimbursement claims, according to the National Highway Traffic Safety Administration. As of last week, Maryland dealers had submitted claims for $34.4 million in reimbursements.
But few of those dollars have made their way back to Maryland.
"It's getting to the point where we can't keep sustaining this thing," said Peter Kitzmiller, president of the Maryland Automobile Dealers Association. "We can't afford to keep putting out money."
The regulations called for dealers to be reimbursed in seven to 10 days, Kitzmiller said. "That certainly hasn't been the case."
The Maryland dealers association surveyed 300 members last week about the program. Among the 70 respondents so far, fewer than 2 percent of claims for reimbursement have been paid. Nine percent had been rejected, while another 9 percent were approved but not yet paid.
Kitzmiller said the government owes some dealers hundreds of thousands of dollars and even millions.
Government officials say part of the problem is that dealers submit incomplete claims, which in turn cause delays.
Federal officials told auto associations last week that the government was assigning an extra 1,000 workers to process claims, Kitzmiller said. Dealers would be relieved if they started seeing an increase in the pace of reimbursements this week, he said.
Count Ed Dreiband among them.
Dreiband, owner of Northwest Honda in Owings Mills, said he sold about 75 vehicles under the federal program and is waiting to be reimbursed for $310,000.
