Uncle Sam is slow to open checkbookMany local dealers are holding off on submitting paperwork because they haven't received their "cash for clunkers" federal stimulus money.
By: By Peter Passi, Duluth News Tribune, Pine Journal
Ed Thamm of Duluth thought the car he bought through the “cash for clunkers” program last month would provide reliable service for years to come. But on Sept. 1 — three weeks after buying a new Kia Rio — Thamm found his vehicle undriveable.
That day, the temporary permit for his new ride expired, and Thamm had not received his regular plates. After a few calls, he learned that the documents required to license his Rio had not been submitted by his dealer, who declined to do so until he received slow-flowing federal stimulus money.
His dealer, Kia of Duluth, is among several in the area refusing to submit customers’ paperwork hostage until the government comes through with their cash.
“Essentially, they were holding my paperwork hostage until they received cash from the federal government,” said Thamm. “In my mind, it didn’t seem right.”
Brad Nelson, Kia of Duluth’s general manager, said he did not consider it prudent to pay additional money for non-refundable licensing fees until he knew a deal was going through.
Other dealerships have taken a similar stance. Alan Birman, co-owner of Cloquet Ford and Chrysler Center, sold 27 vehicles through cash for clunkers and said he is reluctant to transfer titles for the vehicles until he knows that sales predicated on federal stimulus money will go through. A person cannot be issued license plates for a vehicle without a title.
“Dealers were put in a position where we had zero recourse. We were supposed to let people drive off the lot with $30,000 vehicles in hopes that we would receive $4,500 back later,” Birman said. “They told us: Trust us. We’re the federal government.”
Other dealers, however, have placed their faith in the government, issuing plates before the federal money arrived.
“We decided to simply float that money until we were reimbursed,” said Steve Fresacher, a salesman at Kolar Auto World.
Nelson said that his Kia dealership already had “many hundreds of thousands of dollars” of financial exposure as a result of vehicles customers had been allowed to take possession of in anticipation of stimulus payments.
But the long wait for payments has created an unnerving cash-flow crunch for many dealers.
A LEGAL ISSUE
Nelson said most law enforcement officials have been sensitive to the situation.
“We’ve had a couple instances of people being stopped, but the State Patrol has been very understanding,” he said.
Such anecdotes did little to comfort Thamm.
“The dealer assured me that the cops were being pretty lenient, but I don’t want to drive a car illegally,” said Thamm, 61, explaining why he chose to park the vehicle until he could resolve the issue.
Thamm did the right thing, said Andy Skoogman, communications director for the Minnesota Department of Public Safety.
“This is not one of those cases where you want to act first and then ask for forgiveness later,” Skoogman said, explaining that anyone who drives on an expired permit risks a citation. He encourages car buyers waiting for a license to visit a Department of Motor Vehicles station, where representatives can issue conditional licenses to people in similar straits. Thamm obtained a conditional license on Sept. 10.
“We did initially have a number of people in the same predicament with the cash for clunkers program. But we haven’t seen as much of that lately,” Skoogman said.
He warned that car dealers, too, are taking their chances if they choose not to file required title and licensing paperwork in a timely fashion. State law requires dealers to submit a title transfer, plus taxes and fees, within 10 days of any sale. Likewise, Skoogman said dealers must promptly submit an application for license plates and get those plates to the customer before a 21-day temporary permit expires.
Violating the law is a misdemeanor, carrying a maximum punishment of 30 days in jail and a $700 fine.
Birman said he’d rather face the risk of a ticket than the possibility of being shorted $3,500 or $4,500 per car. In fact, when recently contacted by the Minnesota State Patrol, Birman admitted to 27 technical violations of the law, which he blames on delayed payments. But the Patrol decided not to press charges after Birman explained the situation.
Nelson said Kia of Duluth has dozens of customers who were forced to drive on expired permits as a result of delays in Cash for Clunkers payments. But he commends officials for their understanding.
“The state has gone above and beyond to make sure the consumers and dealers were not hurt by this,” he said. “Everyone knew this was a temporary situation.”
Stimulus is slowly making its way to dealers. U.S. Transportation Secretary Ray LaHood reported this week that about 70 percent of cash for clunkers payments have been made. The prior week, only about 40 percent of the money had been distributed.
“It was a big breakout week,” said Nelson, observing that Kia of Duluth has now received almost 80 percent of stimulus money coming to it.
Birman said he, too, is finally seeing the federal money flowing in, and Cloquet Ford and Chrysler Center has completed almost 90 percent of its outstanding clunkers deals.