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US extending clunker deal to new-car orders

Some automakers boost production

Associated Press / August 14, 2009

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WASHINGTON - Car shoppers running into shortages of certain vehicles at dealerships will still be able to use the Cash for Clunkers program to reserve the car of their choice, the Obama administration said yesterday.

The Transportation Department said consumers who want to purchase a new vehicle not available on a dealer lot will still be eligible for the car rebate program if they order it from the manufacturer. The move will help dealers and automakers who have struggled to keep hot-selling vehicles in stock because of the popularity of the government incentives.

“Allowing consumers to order vehicles and qualify for the rebate will expand buyers’ choices and keep production lines running,’’ said Transportation Secretary Ray LaHood. He said the department was “trying to make sure that everyone who wants to can participate in this wildly successful program.’’

Under the original rules, eligible car buyers who qualified for the incentives of $3,500 or $4,500 had to take delivery of the vehicle from the dealers’ lot, limiting the choice of car shoppers. Dealers can now reserve a vehicle from an automaker by using a vehicle identification number and submitting it with the paperwork to the government.

Automakers such as Ford, Toyota, and Honda have increased production to meet demand. Ford Motor Co. said yesterday it was increasing production of its popular Focus and Escape models, while Toyota Motor Corp. has said it will boost production of the Corolla sedan. All three have been among the top sellers of the government program.

Through early yesterday, nearly half of the $3 billion program had been spent, prompting sales of 339,000 new vehicles. Congress extended the program last week, adding $2 billion to the car incentives. The funding could be depleted by Labor Day.

Also yesterday, consumer advocacy groups called on the Department of Transportation to crack down on dealerships offering questionable sales terms to customers participating in the Cash for Clunkers program.

The groups complained that some dealerships have pressured customers to sign agreements forcing them to repay their clunkers rebate if the dealership is not reimbursed for the sale. The agency says car buyers are not required to sign the so-called contingency forms to qualify for a clunkers transaction, but the groups said the waiver should be banned altogether.

“It involves dealers attempting to shift the risk from themselves to consumers if the Cash for Clunker deals don’t go through,’’ said Rosemary Shahan, president of Sacramento-based Consumers for Auto Reliability and Safety. “We believe it is a form of bait and switch.’’

Dealerships have said they asked customers to sign the waivers as a form of self-protection. Bailey Wood, a spokesman for the National Association of Automobile Dealers, said waivers are a way of protecting dealers from being stuck with a loss for rebates they offered but for which they can’t get reimbursed. “Dealers are out hundreds of thousands and in some cases millions of dollars in back Cash for Clunkers transactions,’’ Wood said.