'Clunkers' Insurance Rule Rattles Lawmakers Feingold, Others Appeal to Agency Overseeing Deals

Wisconsin members of Congress said Wednesday that requiring a car to be insured for a year prior to its acceptance into the "cash for clunkers" program is unfair to state residents and should be changed.

In a letter Wednesday to the National Highway Traffic Safety Administration, which is handling the program, U.S. Sen. Russ Feingold (D-Wis.) said current Wisconsin law does not require drivers to have car insurance, so the government should not make that a requirement for residents to participate in the program.

The letter was signed primarily by Democratic U.S. senators and representatives from Wisconsin, Michigan and New Hampshire. Two Republicans, Rep. Tom Petri of Wisconsin and Sen. Judd Gregg of New Hampshire, also signed on.

Wisconsin will require auto insurance for all drivers starting June 1, 2010. New Hampshire is the only other state that does not require drivers to have car insurance.

"Before the limited funds for this program run out, the National Highway Traffic Safety Administration must quickly correct this error to reflect Congress' intent that law-abiding citizens of all states, including Wisconsin, should be able to participate in the cash for clunkers program," according to Feingold's statement.

A spokesman for the NHTSA declined to comment.

The Car Allowance Rebate System program, which started Monday, allows consumers to receive a tax credit of up to $4,500 on the purchase or lease of a new vehicle if they trade in a qualified vehicle that gets 18 mpg or fewer.

Wisconsin auto dealers reached Wednesday said the insurance requirement has surfaced on a number of transactions.

"We have had a handful of people who have been affected," said Brad Schlossmann, of the Milwaukee-based Schlossmann Automotive Group.

Even as they are trying to iron out details, dealers say the clunkers program has been a welcome boost to business, which had been down for months.

"Our business, especially on our entry-level cars, has been brisk," said John Bergstrom, chief executive of Neenah-based Bergstrom Automotive, Wisconsin's largest dealer group. "It has certainly brought a lot of people into the marketplace."

The program is set to expire Nov. 1 or whenever the $1 billion Congress allocated for the program runs out. Dealers expressed doubt the money would last that long.

"We're selling everything in stock," said Andy Palmen, president of the Palmen Automotive Group, which has dealerships in Racine and Kenosha. "It's just been nuts."

Some dealers complained Wednesday that the system for reporting sales to NHTSA is cumbersome and not moving quickly enough to process deals.

A NHTSA spokesman urged patience, saying there are thousands of dealers in the nation who are trying to put deals through the system. As of Wednesday morning, more than 16,000 vehicles with $68.9 million in credits had been sold under the program, the spokesman said.

"It's a pig in a python," said Chris Snyder, general counsel for the Wisconsin Auto & Truck Dealers Association, of the crush of paperwork headed to the federal government, as required by Congress.

He said some dealers are worried -- based on the business it has already generated -- that the program will run short of money before all the requests can be processed and approved.

Added Jim Tolkan, president of the Automobile Dealers Association of Mega Milwaukee Inc., "All the (dealers) that are frustrated, they're happy, too," because of the sales the program has generated.

Trade-in list has changed

Car and truck buyers looking to take part in the government's "cash for clunkers" program should double-check the mileage of their trade-in vehicle after a review of fuel-economy data changed the eligibility of 164 automobiles.

The Environmental Protection Agency said 78 vehicles that used to qualify as trade-ins under the program no longer qualify. Eighty- six vehicles that did not qualify now do, the EPA said. The change follows a review of the fuel economy listings of 30,000 vehicles over 25 years, the EPA said. Eligible vehicles must get 18 miles per gallon or less. Go online to www.fueleconomy.gov to find the list of eligible vehicles.

Source: Associated Press

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