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Dealers still worry as clunkers deal ends

By Sean Sposito and Clifford Atiyeh
Globe Correspondents / August 22, 2009

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The Cash for Clunkers program may be ending soon but not the headaches for dealers who say they are still having trouble filing for rebates and have to take out loans as they wait for government reimbursement.

Designed to spur auto sales, the federal program allows consumers to get a $3,500 to $4,500 discount on a new fuel-efficient car if they trade in a gas guzzler. The $3 billion program has been so popular that the government can’t process rebates fast enough, forcing some dealers to take out loans in order to cover the cost of customer rebates.

Massachusetts dealers have requested about $42 million in rebates from the federal government, according to the Department of Transportation. But most are still waiting to be paid, said Robert O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association.

Ray Ciccolo, president of Village Automotive Group, which operates eight Boston-area dealerships, said he has not received any rebate checks for the roughly 250 cars he has sold since the program began in late July. That means he’s on the hook for almost $1 million. He said he had to take out a loan from Sovereign Bank to cover the rebates.

Ciccolo said he continues to have problems processing the forms online. “Every time you submit [the paperwork], the site is down or it’s crashed,’’ he said. One of his sales managers tried using the government hotline for help last week but “it took one hour until someone finally answered the phone.’’

Bill Adams, a Department of Transportation spokesman, said the federal government plans to get all rebates to dealers within a month. “We are focused on making sure they get their reimbursements and have three shifts working across the country to make that happen,’’ he said. As of yesterday, dealers had requested more than $2 billion in rebates, accounting for 489,000 sales, according to the department. The program is set to end at 8 p.m. Monday.

Because the government has been slow to reimburse dealers, some car manufacturers have been offering loans to them.

Chrysler Group LLC said on Thursday it will advance its dealers cash for claims submitted under the Cash for Clunkers program. Chris Naughton, a Honda spokesman, said the manufacturer is extending short-term loans to about 30 percent of its dealers who use Honda to finance their sales.

For all the program’s flaws, it achieved its primary goal: boosting auto sales. The Big Three automakers credited the program with sales increases in July. With the program heavily promoted, many Massachusetts dealers reported a surge in business as customers sought out deals.

But complex rules also triggered backlash from buyers, some of whom have been waiting weeks for their new rides.

Paige Dickinson of New Bedford said she traded in her 1996 Jeep Cherokee for a 2009 Honda Fit at Herb Chambers Honda Boston. She said she completed all the necessary paperwork on Aug. 5 and was told she would get her new car in “three or four days,’’ but it still hasn’t been delivered. “They can deliver it,’’ she said. “They just won’t.’’ Dickinson said her first car payment was due Aug. 15.

Thomas Tague of Concord traded in a Jeep Cherokee for a Mini Cooper S at Herb Chambers Mini Boston. “I don’t think the government is doing a good job making clear the actual rules for dealers,’’ Tague said. The dealers’ “story seems to be consistent that they’re not going to release cars until they get approvals.’’

Herb Chambers said he’s confident his customers will receive their cars. He said his dealers are only waiting for submission confirmation from the government to release the cars, not an actual payment. “As soon as we have an approval number, we deliver the car. When we get paid for it is our problem.’’

Customers, he said, were told upfront that the dealer would not deliver a car without getting a submission confirmation. “How could you deliver a car without knowing it’s going to get approved?’’

Chambers said about 16 percent of his cars sold under the program have been approved for rebates. He acknowledged that the process can be frustrating. “It’s a tremendous headache to have hundreds of automobiles sitting around that you can’t deliver, and people want them,’’ he said.

Sean Sposito can be reached at ssposito@globe.com. Clifford Atiyeh can be reached at catiyeh@globe.com,