Local dealers nervous, see little benefit from ‘Cash for Clunkers’ program
Although the “Cash for Clunkers” program seems to be a success nationwide, local car dealers said they are not overly excited.
“It hasn’t helped us any at all,” Craig Ford co-owner Jerry Thompson said. “We haven’t done any.”
The problem, Thompson said, is government requirements prevented most people interested in the deal from being able to qualify.
“Cash for Clunkers,” officially known as the Car Allowance Rebate System, provides a $3,500 or $4,500 credit on new car purchases if the buyer trades in an older car with worse gas mileage.
Trade-ins must be 25 years old or newer, and generally get less than 18 miles per gallon, though standards for large trucks or cargo vans differ.
Buyers also must prove they owned the trade-in for the past 12 months and had it insured for that entire time, as well.
Thompson said there’s been interest, but none of his prospective customers have been able to meet all the requisites needed to cash in on the government’s credit.
“We’ve had a lot of inquiries, but when we get into the meat and potatoes of the program, we can’t find a deal that qualifies,” he said.
Steve Maneotis, co-owner of Victory Motors, said it’s been similarly tricky at his dealership to make “Cash for Clunkers” work for customers.
Cook Chevrolet owner Scott Cook was out of town and unavailable for comment.
One of the biggest sticking points, Maneotis said, is that many people want to trade in vehicles for large trucks that don’t fit into the program’s parameters.
Worst of all, though, are the hoops people have to jump through if they do qualify, Maneotis said.
“It’s a monotonous program that makes me very nervous,” he said. “In order to verify people, though, there’s a lot of red tape. It took me seven hours to put one together yesterday. You have to pull all the documents, and then make sure you cross all the T’s and dot all the I’s.”
Dealers have to watch things carefully, Maneotis said.
For instance, if a person goes by William on his car title, and Bill on his insurance, the government can deny the application.
The prospect of a denial is a scary proposition for dealers, Maneotis added, because the onus of making up a denied credit falls on their shoulders.
“From my standpoint as a dealer, the $4,500 credit is very much more than the profit on one of these deals,” he said. “It kind of puts a dealer in a precarious position of not knowing whether they’re going to be paid or not be paid. That’s just not a position we want to be in to go back to a customer and ask for the money the government was supposed to pay.”
Victory Motors has made one successful “Cash for Clunkers” sale, swapping a 1988 Dodge Dakota with more than 200,000 miles for a new Jeep.
Angell Britt, a Vernal, Utah, resident, was the customer behind that deal.
For him, there have been no problems.
“From what I know about the program and what has happened so far, I’m happy,” he said.
After one sale, though, Maneotis is not sure he and the owners want to do many more.
“I’ve talked to a lot of dealers around the country, and they’re all nervous,” he said. “I know a dealer in Idaho who’s done more than 250 of these and hasn’t been paid for any. He’s on the hook for more than $1 million.
“Is it generating traffic and interest? Yes, it is. But, we’re very hesitant about how many of these we do.”
Tim Jackson, president of the Colorado Auto Dealers Association, said fear is common at dealerships across the country.
“We’ve been a soundboard for that in the state,” he said. “We have dealers in the (Denver) metro area that have done 40, 60, up to 80 of these and haven’t been paid for the first one. Still, I don’t want to make too much out of this, because the dealers who are doing these transactions have been able to sell a lot of cars.”
Statewide, dealerships have sold between 4,900 and 5,400 cars through “Cash for Clunkers,” Jackson said.
Using the low side of 4,900 and multiplying it by the minimum credit of $3,500 that equals at least $17.1 million in government credits paid to Colorado consumers and much more in new car sales for Colorado dealers.
Statewide sales of new cars were off 41 percent through the first six months of 2009 compared to 2008, Jackson said.
Although it would seem difficult for the “Cash for Clunkers” program to make up that difference, it has helped stem the tide, he added.
Considering the large numbers involved and the bleak future auto dealers faced earlier this year, Jackson said his organization is on board with Cash for Clunkers.
“It has worked,” he said. “The big stimulus package that the government passed, there’s still a lot of questions about whether that will actually add jobs. This one has worked. With the economy picking up and this credit program out there, maybe auto dealers can start to turn the corner on what they’ve been going through.”
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