The auto dealers resist the plan to pay the plug-in hybrid tax credit at the time of purchase because they fear they could be left with large out-of-pocket expenses if applications for reimbursement are denied by the federal government, according to an article in the Wall Street Journal.
Car dealers are understandably concerned because the federal government can make life extremely difficult for auto dealers when it meddles in their day-to-day business. During the Cash for Clunkers program in the summer of 2009, dealers would have to into their stores during the middle of the night to have any hopes of processing their applications online for reimbursement of $4500 for used cars they had accepted in trade.
Under the current plan proposed, consumers would no longer get a tax credit on their income taxes when returns were filed in the spring. The Obama White House wants the credit to come in the form of a cash payment from the dealership.
That’s the main reason auto dealers are resistant to the plan to pay for the plug-in hybrid tax credit. If applications were denied or funding ran out (as it quickly did with the Cash for Clunkers program), dealers would have no way of recouping the money they paid out on behalf of the federal government. Also not stated, but most likely a concern, would be lengthy delays for reimbursement, in effect, lending the government money interest free.