The U.S. government says it will suspend its popular "cash for clunkers" auto rebates Monday as the program's $3-billion (U.S.) budget runs dry, a month after it was launched.
The program, offering payments of up to $4,500 to people who trade in old gas guzzlers for new, fuel-efficient vehicles, will end at 8 p.m., Aug. 24, by which time all applications for the rebates must be submitted to Washington.
"We've seen an overwhelming and overnight success and so much so that we've reached the point where we need to wind this program down," a senior Obama administration official said yesterday.
"The goal of the wind-down is to provide a soft landing for dealers and consumers and ensure the program ends in a successful way," the official told reporters. The official asked not to be named.
The Transportation Department said it thought enough money would be left to continue accepting submissions until the Monday deadline, based on conservative estimates of valid transactions to date.
The announcement comes a day after a group representing some 20,000 new car dealers in the United States warned that dealers who accept additional sales under the program face a growing risk they may not get back the rebates they have already given customers.
Dealers have complained of difficulty running businesses while awaiting government cheques under the program.
As of yesterday, auto dealers had submitted claims to Washington for nearly 457,500 vouchers totalling $1.9-billion, of which just under 40 per cent of the applications have been reviewed, according to the Department of Transportation.
The government has paid about $145-million to dealers. The administration official said that a large number of applications had been returned to dealers, to be resubmitted, because of "inaccurate or incomplete" information.
The official advised dealers to get all of the necessary documentation and paperwork available before submission to ensure they have a valid deal.
The weeks-long delay in reimbursements has placed an additional burden on dealers whose balance sheets have been hit hard by tight credit and the worst U.S. auto sales in nearly three decades.
To address dealers' concerns, General Motors Co. said yesterday it would provide cash advances to dealers to give them liquidity to run their businesses while they await government cheques.
GM said sales in the past two months had exceeded its internal forecast by more than 60,000 vehicles, largely driven by the "clunkers" program.
The auto maker said it intended to provide advances for qualifying new vehicle sales already transacted under the rebate program and would provide advances as long as the program was in effect.
By late July, the "clunkers" program, inspired by similar programs in Europe, had been drained of its original $1-billion budget. Congress authorized another $2-billion to extend the program.
U.S. retail vehicle sales in August are projected to exceed one million units for the first time in 12 months, auto industry forecasting firm J.D. Power & Associates said yesterday.