Customers cash in on clunkers

Published 5:00 am Wednesday, July 29, 2009

Lavelle Sullivan came close to giving away a new car Monday whena young customer was able to claim a host of factory rebates andincentives to cut the cost of a new 2009 Ford Ranger almost inhalf.

“I mean he stole the thing,” Sullivan said, pointing out thathis customer drove off in the approximately $16,000 vehicle forless than $10,000.

The biggest reduction in cost came in the form of a $4,500 Cashfor Clunkers rebate, the active ingredient in the federalgovernment’s new Car Allowance Rebate System that allows older,fuel-inefficient vehicles to be turned in for a cash rebate towarda new car. The program is designed to spur business in thedowntrodden automotive industry and put more fuel-efficientvehicles on the road.

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Though the CARS program is not without a few problems, Sullivansaid, so far it’s working well in Brookhaven. Dealerships justbegan the program on Friday, and already more than 20 Cash forClunkers deals have been struck at the city’s five new cardealerships.

The program seems to be having its intended effects, Sullivansaid, as traffic through the dealerships has already increased andcustomers who participate are driving off the lots in vehicles thatget much better gas mileage than their previous clunkers.

“We’ve had a great response right out of the gate, and it’sbuilding steam tremendously,” he said. “I don’t know how much ofthis is incremental business, but when you take a vehicle that’sworth $1,000 and you can trade it in for $4,500, that did push themto buy. And there’s more buyers out there than people realize whoare eligible.”

Stan King Chevrolet Sales Manager Brannon Craig indicated anumber of people have come in to inquire about the program. He saidthe CARS program has facilitated a number of vehicle purchases thatlikely would not have been made had the program not been inplace.

“It’s had a tremendous response from the local communityinquiring about the program,” Craig said.

To be eligible for the CARS program, a customer’s clunker has tomeet a short list of requirements. Vehicles brought in for the CARSprogram must be in working order and less than 25 years old, get 18miles per gallon or less and have been registered and insured forat least one year. The rebates available are either $3,500 or$4,500, and are determined based on the type of new vehiclepurchased and the difference in fuel economy between the new carand the clunker.

Brookhaven Honda Sales Representative Mike Duffie said thedifference between a $3,500 and a $4,500 rebate has caused someconfusion among customers. He said clunker traders should entertheir car’s information at, where they can learn itsrebate qualifications up front.

“Go to the Web site beforehand and check your trade-in,” Duffiesaid.

The program only works for new car purchases or leases. The newvehicle must be priced under $45,000 and meet certain fuel economyrequirements – 22 mpg for passenger cars, 18 mpg for trucks and 15mpg for heavy trucks.

Fuel efficiency requirements vary for larger trucks and vans. Afull list of CARS stipulations may be found online

The most pressing quality of the program, Sullivan said, istime. CARS is funded to the tune of $1 billion and lasts until Nov.30, and he believes the funding will dry up long before thedeadline.

“This is a first come, first serve program, and I don’tanticipate it will last until November,” Sullivan said. “I thinkthe biggest issue for a lot of dealers will be keeping inventorylevels up.”

Right now, there is plenty of inventory to be had in Brookhaven.Toyota claims 25 models that fit the CARS requirements, while Fordhas 20, General Motors has 14 and Nissan 13. Brookhaven Hondaemployees said all Honda models are eligible.

CARS has been used in Brookhaven to purchase higher-qualityvehicles – Sullivan has sold F-150 trucks with the program – but sofar most of the business is going toward securing small, lesscostly vehicles.

Legacy Toyota General Manager Billy Crozier said the base modelTacoma has been his leading sale. The Cash for Clunkers rebate,when paired with other incentives, shaves dollars off the smalltruck’s $15,000 price tag.

“The folks who are using them are probably working out of themin some sense, and Toyota has got the only truck with the gasmileage that will get you the full bang for $4,500,” he said.

Paul Barnett said his Nissan dealership has sold several Versas,an approximately $10,000 car that averages more than 30 mpg on thehighway. The Versa is already cheap, and if a customer chooses abase model, the price falls even further in the four-digitrange.

“I’ve got people buying vehicles without a radio,” Barnett said.”We’ve sold probably more of the lower-end vehicles to get thattotal price point hovering around the $10,000 to $12,000 range. Ifyou take a $2,500 rebate on a vehicle, now you add (the CARS)$4,500 rebate to that, that’s $7,000. If you take $7,000 off a$17,000 car, percentage-wise, that’s significant. That’s wherewe’re seeing a lot of focus.”

One potential problem with CARS could be dealer reimbursement,though local dealerships are not hanging up on the question. Craigsaid a lengthy reimbursement process could present dealerships witha cash flow problem, and the government has made no clear promiseswhen the money will be released.

“Any time you’re dealing with a government entity, it’s never afast-paced process,” he said. “If you came and traded a vehicletoday, I’m giving you that $4,500 – I’m at the mercy of the federalgovernment. You’re talking about thousands of dollars hanging inthe air. GM has told us if we enter into this program, you’re atyour own risk.”

While the CARS program is helping put drivers into newfuel-efficient vehicles, the clunkers that are traded in will neverbe seen again. The vehicles are scrapped at government-approvedfacilities.

To ensure the gas hogs never again make it back out into themarket, one page of the 136-page dealer instructions detailsdestroying the engine by draining the oil, replacing it with awater/sodium silicate solution and running it at 2,000 rpm untilthe engine blows. The useless motor is then labeled as destroyed asa part of the CARS program.

The clunkers’ end is one of the sad – and perhaps unnecessary -parts of the CARS program, Sullivan said. He predicted that as someclunkers are destroyed, those remaining would go up and price andhurt the used vehicle market that many less-affluent consumersdepend on.

“There are a lot of nice vehicles out there that will have to becrushed – vehicles that would typically be cycled back through, forpeople who can only afford a $1,000 car,” Sullivan said. “I’mafraid it will make that market extremely tight. I think it willeventually run the value back up and make it tougher on thosebuyers. All five (of the clunkers traded to Sullivan Ford) arerunning, they’re not what you would think of as a clunker. Theywere viable, good vehicles.”