Cash-for-Clunkers an Early Hit, Dealers Say

Early reports from dealerships across the country indicate the government’s Car Allowance Rebate System (CARS), popularly known as “cash-for-clunkers,” is an early success despite registration issues and problems stemming from last minute rule changes.

Checkered Flag Automotive Group in Virginia Beach, VA, reported on its Facebook page it sold 54 vehicles on July 23 to customers using the government incentive. Over the weekend, that number jumped to more than 100 sales.

Brian Benstock, a partner in Paragon Honda Acura in Queens, NY, says his store saw 40 cash-for-clunker deals the first three weeks of July.

The Rick Case Automotive Group, with stores in Florida, Georgia and Ohio, attributes 20% of its July sales to cash-for-clunkers.

“We quickly created a program that helped consumers take advantage of the program, and it has helped our sales a lot,” says Rick Case, the group’s owner. “So far all our sales are conquest sales.

“More than 70% of the clunkers were Ford or Chevy trade-ins, 71% were SUVs, 93% had over 100,000 miles (16,093 km) and 71% qualified for the $4,500.”

Case announced earlier this week it will begin matching the $4,500 government incentive on certain vehicles.

Numerous other dealers around the country reportedly say they have been flooded with consumers looking to deal.

Brian Pasch, a consultant who is helping dealerships put together successful cash-for-clunker marketing initiatives and has been following the program on his website, speculates the incentive program could run out of money by Aug. 1.

Rick Case doubles government incentive.

Sean Wolfington, partner with Tier 10 Marketing, a dealership consulting firm, believes the program likely will last at least two months, but says it’s too early to say just yet how long it will go.

According to the CARS legislation, the program is intended to run to Nov. 1 or whenever the $1 billion funding runs out.

Tier 10 Marketing says its dealers are reporting 79% of clunkers being traded in are SUVs, trucks and vans with more than 100,000 miles.

The average age of a trade-in model is about 13 years old, with about 138,000 miles (222,083 km). The most popular clunker trades involve Chevrolet, Ford and Dodge brands.

The firm also reports 64% of the deals have qualified for the $4,500 voucher.

There have been hiccups, however. Legislation signed into law by President Obama in May stipulated cash-for-clunkers was to start July 1. But the program did not get off the ground until the National Highway Traffic Safety Admin. posted the final rules July 24.

The rules, which consist of a 135-page document, are proving to be complicated, say dealers, many of whom have created a separate administrator position to manage the paperwork.

Several dealers reported to Ward’s over the weekend that they were unable to complete the online registration process because the government server housing the cars.gov website was overwhelmed by 1.8 million customers and more than 15,900 dealers.

NHTSA tried to correct the problem by taking down the site and placing the dealers’ registration site on a separate server last Friday, just hours after cash-for-clunkers hit full stride.

Meanwhile, the U.S. Environmental Protection Agency changed without warning the eligibility of 100 vehicles when it updated their combined fuel-economy ratings, following a month-long review of nearly 30,000 vehicles.

The EPA says the split was 50-50 of vehicles made ineligible and those qualifying because of the changes.

The basic eligibility guidelines call for the government incentive plan to provide $3,500 for consumers scrapping used vehicles rated at 18 mpg (13 L/100 km) for new cars that achieve 4-9 mpg more (10.6-8.7 L/100 km), or $4,500 for new cars gaining at least 10 mpg (8.4 L/100 km).

Customers will receive $3,500 for scrapped light trucks rated at 18 mpg (13 L/100 km) or less when the new truck gains 2-4 mpg (11.7-10.6 L/100 km), and $4,500 for a 5 mpg (10.2 L/100 km) higher improvement.

Replacement vehicles must cost less than $45,000 (not counting vehicle options), while trade-ins must be 25 years old or less, registered under one owner and insured continuously for the full year preceding the trade-in.

Auto makers also have gotten into the act in an attempt to spur sales at their dealerships.

Hyundai Motor America launched the first marketing salvo in early July trying to get an early jump on other auto makers with the cash-for-clunkers incentive.

While the National Automobiles Assn. and NHTSA both cautioned dealers not to sell vehicles under the program until the final rules were published July 24, Hyundai began fronting the $3,500 and $4,500 incentives to its dealers if they sold a vehicle using cash-for-clunkers.

Hyundai says the program generated 10% of its overall sales through the first half of July.

The first week of the program, the Korean auto maker reported Ford-brand vehicles accounted for 32% of the trade-ins to be scrapped, with Dodge making up 23%. Various luxury brands accounted for the rest.

Hyundai’s Elantra proved to be most popular vehicle for cash-for-clunker buyers, which customers could purchase for about $8,600 with government and company incentives.

Chrysler Group LLC pounced early on the cash-for-clunkers program, starting July 23 with offers to double the government incentive on select vehicles.

Chrysler’s plan, which runs through Aug. 31, provides $3,500 or $4,500 rebates (depending on the government incentive), or 0%, 72-month financing, on most ‘09 models.

Ford Motor Co. made early noise about being the de facto source of information for the “cash-for-clunkers” program.

“We’re setting out to be go-to experts on the program itself,” John Felice, Ford Div. marketing manager, told Ward’s. “We’re communicating with our dealers and making sure they’re equipped on details.”

But Ford appears to have been trumped by Hyundai and Chrysler programs. And Ford executive Mark Fields tempered expectations last week, telling reporters the initiative likely would not lead to a dramatic spike in sales.

Ford Credit told Ward’s it has no plans to change its lending practices to accommodate potential non- and subprime consumers for cash-for-clunkers. Ford dealers report being told the same thing.

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