The nightmare continues and actually grows for new car dealers as the Cash for Clunkers program is placing many in a bizarre Catch-22 situation. The hook? If they don’t sell cars they will go out of business, but if they sell too many cars they’ll probably go out of business, too.

Here’s the problem. The government is drowning in reimbursement requests from dealers for C4C cars and is simply not paying. Reportedly, some dealers are waiting on more than a million dollars from the Feds to cover the “clunkers” that have already been turned in. So the more cars you sell, the more debt you are carrying, and the more cash poor your business becomes. Sooner or later your bank account runs dry and you’re screwed.

Think we’re exaggerating?

Click here for a story from the San Franscisco Chronicle (Thanks for the tip DW)

Click here for an Automotive News story that really captures the fear in dealers’ hearts (Thanks for the tip Kris)