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Staff Photo by Dan Henry Herb Adcox walks past a half dozen vehicles that have been traded in as a part of the Cash for Clunkers program at his Chevrolet dealership in Chattanooga, Tenn., on Friday.
For all the good the federal "Cash for Clunkers" program might be doing to prop up the ailing automotive industry, some worry it could be robbing the market of good, dependable used cars.
Take a late 1990s-vintage Chevrolet pickup, for example. Chattanooga General Motors dealer Herb Adcox has a whole lot of those trucks, and they are all bound for the scrap yard after being traded in for newer models as part of the program.
On the private market, such a truck might sell for as much as $5,000 and fill a need for cheap used cars, dealers say. But its trade-in value is far less, and the federal government is giving a rebate of $3,500 or $4,500 if the owner trades it in as a clunker.
"The federal government requires me to make sure that vehicle's transmission and engine are disabled," Mr. Adcox said. "And then the scrap yard has to certify that it's been crushed or shredded. It's a $15,000 fine if it makes it back on the road."
The goal of the Car Allowance Rebate System, dubbed "Cash for Clunkers," is to get gas-guzzling automobiles off the road and have them traded for vehicles that get a few more miles to the gallon.
"This clunker program is going to drive up prices in the low end of the market," said Bob Brooker, of Brooker Ford. "I already see that happening."
Mr. Brooker used the example of a 1999 Cadillac with low miles that came into his dealership. The owner wanted to trade for a Mercury Montego. The vehicle qualified for a $4,500 rebate from the federal government, but it only had a $3,500 trade-in value.
He decided to buy the vehicle for $4,500, Mr. Brooker said, because he thought its resale price on his lot would be more than that. Some dealers, he said, would just as soon send the car to the scrap yard, which takes a "nice" car out of the market, he said.
"If someone comes in with a vehicle that's only worth $200 or $300, they are getting a real bargain," Mr. Brooker said. "But if your car's value is right at the rebate price, it's not much of a bargain."
Used car dealers say they aren't worried about their supply drying up. After all, there's a used car in every driveway, but they are worried about a specific group of cars that appeals to a low-income car buying market going away for the next few years.
Those vehicles are driven by a significant portion of the population that just can't afford a new car. For many, a 10-year-old vehicle that runs well is the only option, said Jason Wright with Wright Motor Co. He sells cars that are between 14 and 4 years old.
"A used car (with a trade-in value of) about $3,500 to $4,500 is a pretty nice car," Mr. Wright said. "The car that's worth about $1,000, those are the ones that need to get off the road. They aren't even safe to drive sometimes."
On Thursday evening, just before the U.S. Senate adjourned, it voted to allocate another $2 billion in federal stimulus dollars to the CARS program. Dealers previously were authorized to continue selling the vehicles until Friday. This funding refreshment gives them the ability to continue granting rebates until Sept. 1 or whenever the program runs out of money again.
So far, it's been a real boon for dealers.
"May and June sales were just horrible," Mr. Adcox said. "I'd say sales are up by about 50 percent because of this program."
But the red tape certainly is a hassle, Mr. Brooker said. Despite that, when times are slow, jumping through the federal government's hoops isn't a bad thing, he said.
"It's the government, so you know how that is," Mr. Brooker said. "I had titles that had the owner's name misspelled, so that got sent back to me, and you've got to go back and fix that."
Mr. Brooker said he hasn't gotten reimbursed for any of the rebates he's granted thus far. That's not a concern for him right now, but long-term he's hopeful the market won't need this government incentive just to stay in the black.
"It's a good thing because we're in the black this month," Mr. Brooker said. "But we're getting out of the red on the back of the federal government."
Adam Crisp covers education issues for the Times Free Press. He joined the paper's staff in 2007 and initially covered crime, public safety, courts and general assignment topics. Prior to Chattanooga, Crisp was a crime reporter at the Savannah Morning News and has been a reporter and editor at community newspapers in southeast Georgia. In college, he led his student paper to a first-place general excellence award from the Georgia College Press Association. He earned ...
I assume none of these vehicles have a market value over $4500 with a lower gas mileage than that being traded for, so they are clunkers. And they are being replaced to improve automotive jobs, reduce dependency on foreign oil and improve the air quality. Therein lies their usefulness.
You probably also "assume" that all Americans can afford new cars, "assume" that the total destruction of quality, low cost cars will not drive up the overall cost of automobiles and "assume" that the taxes of people making under $250,000 will not go up from all of this spending.
I don't need to tell you what happens when you "assume".
Increasing the MPG of cars by 5 miles doesn't reduce dependency on foreign oil. You know what happens when you get more MPG? You drive more than you normally would.
There's only one way to reduce dependency on foreign oil...use our own.
najones75- you must have been one of those gullible enough to believe we can drill our way out of foreign oil? The middle east has an abundant reserve that they can pump much cheaper than we can, so baby don't count on much tough drilling here. The options for better fuel mileage with newer vehicles will go a long way to curb demand. Ethanol is a ridiculous brain-child of the profiteers.
I would love to see 3/4 million clunkers off the road. If 2/3rd of those people can't afford to make their payments on the new cars, that's another 1/2 million off the road. I can't think of a cheaper way to extend the usefull life of our roads.
Eddie Brooker isn't getting "into the black on the back of the federal government," he is getting there on the backs of pre-school aged children who must someday pay back the debt with interest. I view it this way: My every time he sells a car on the program my five children inherit a future debt of $900 each ($4500/5 = $900). I hope he and the rest of these thieving dealers go out of business!
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