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'Cash for Clunkers' brings mixed blessing for dealers

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Posted on August 10, 2009 |
By Kathryn Flagg



ADDISON COUNTY — For local automobile dealerships, the “Cash for Clunkers” program has been a mixed blessing.

On one hand, the $1 billion government rebate program — which offers customers up to $4,500 if they trade in a gas-guzzling “clunker” for a more fuel efficient new car — has jumpstarted business at local dealerships. Since the program kicked off in late July, dozens of county residents have purchased new cars.

Of all the stimulus money being pumped into the economy, the “Cash for Clunkers” — officially, the Car Allowance Rebate System (CARS) — seems the most successful effort yet to boost local business, according to Scott Foster, vice president at Foster Motors in Middlebury.

“This definitely brought people out,” said Foster. “It seemed to jumpstart the dealerships. It got orders going into the factories again. I think it was a great program.”

But on the other hand, “Cash for Clunkers” has been a bureaucratic headache for many dealerships, and car salesmen in Addison County are reporting they still haven’t been reimbursed for the rebates they fronted to qualifying customers.

Now inventory is running low at local car lots, and salesmen say they have mixed thoughts about seeing the program stretch on.

Congress appropriated $1 billion in mid-June for the rebate program. After the July 24 kick-off, though, interest in the program was so high that it nearly ran out of funds, which were meant to last until Nov. 1.

Late last week, the Senate approved an additional $2 billion for “Cash for Clunkers,” which is expected to keep it going through Labor Day.

Even if the money for the program is available, some dealers worry that the cars may not be.

“I think … you’re going to see (dealerships) running out of cars, which is a very unusual thing for dealers,” said Tom Denecker at Denecker Chevrolet in Ferrisburgh. “It’s not the worst problem in the world, but you can’t sell from an empty shelf.”

A BOON FOR BUSINESS
Most dealerships in the county reported an uptick in business over the last two weeks — more phone calls, more foot traffic and lots of inquiries about the “Cash for Clunkers” program. That came after a “mediocre” late spring and early summer, according to Mark Stacey, general manager at Shea Motor Company in Middlebury.

Denecker said that between July 24 and Aug. 6, 14 customers took advantage of the program at his Chevrolet dealership. Foster Motors sold 18 cars with the rebate, and Shea sold 10.

Nationwide, the program generated more than 220,000 auto sales. U.S. auto sales overall were down about 12 percent from a year earlier, but July’s sales marked the best performance this year for U.S. automakers.

Denecker isn’t worried about the program “borrowing business from the future.” Critics of the “Cash for Clunkers” program have pointed to what they say is a pent-up demand for new vehicles, and say that the rebate was simply sweetening the deal now for customers who might have purchased a new car anyway a few months down the road.

But Denecker thinks most of the customers his dealership has seen so far would have opted for less expensive used cars down the line instead of heading to a new car lot. And he said the cars they’re trading in did need to come off the road.

“They truly are clunkers,” Denecker said.

For customers who might have shied away from a new car, he thinks the rebate makes all the difference.

Take the Chevrolet Aveo, the model that Denecker said many of the Cash for Clunker customers chose. With rebates from the government and manufacturer, some customers can purchase a new Aveo for as little as $7,500.

Meanwhile, at other local dealerships, “Cash for Clunkers” customers have gravitated toward models like the Chevrolet Cobalt, the Pontiac Vibe and the Dodge Caliber.

Now, inventory is low on car lots. With only 25 new cars on the lot, Foster said his dealership is going to be “a little skinny” until new merchandise arrives.

“I think (the government) did not realize how successful it was going to be,” Stacey said. “We have a bunch of vehicles on order, but the vehicles aren’t coming as quickly as we’d like to see them. Some plants shut down for almost up to 11 weeks. Our inventory is getting low, lower than we would like.”

Other salesmen said much the same thing: cars are on order, but it might take a little while for the new vehicles to arrive at local dealerships.

“Everybody’s in the same boat,” Stacey said. “You can just drive through towns and look at the lots. You can see the difference.”

NAVIGATING THE RED TAPE
Inventory aside, staying on top of the paperwork associated with “Cash for Clunkers” has been stressful for local dealerships.

The program’s list of rules and regulations is more than 130 pages long, with a sign-up form that tallies more than 40 pages.

“You have to have your i’s dotted and your t’s crossed,” said Stacey.

At Denecker Chevrolet, it took the sales team 20 hours to process their first “Cash for Clunkers” transaction. In the first few days of the program, that was complicated by glitches in the CARS Web site, which crashed repeatedly under heavy traffic.

It’s not just the paperwork that’s frustrated some dealers.

As of last week, dealers in the area hadn’t seen any reimbursements yet for the $4,500 rebates some customers have received.

“I have my faith in the government that we’ll get the money eventually, but the dealers all fronted the money,” Foster said.

“It’s not only a hassle, but it’s negative cash flow. If you give the vehicle to the customer, you have to wait to be paid,” Denecker said. “We’re going to have to no longer do them if we don’t start getting the money back. You can’t just give away $4,500.”

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