Cash For Clunkers Expires

By Clodel Remy

The Obama administration describes the Car Allowance Rebate System (CARS) program, also known as Cash For Clunkers, as “the federal government and the private sector taking bold action.”

And while it boosted auto sales over the past year with a nearly $4,500 rebate, companies are already claiming that sales are falling due to the program’s running out of funding. It is falling as far as 25 percent, the Associated Press reported last week.

“We believe the remainder of 2009 will continue to be a challenge for the U.S. automotive market,” said Peter Fong, lead executive for Chrysler’s sales organization, to the Chicago Tribune.

“Credit markets have thawed slightly, but still remain tight, and consumer confidence, as we saw in September, is tenuous.”

“For many consumers, it won’t feel like the recession is over, even though technically it may be,” Ford analyst George Pipas said to the AP.

The government approved nearly $3 Billion in rebates to dealers during the 13 month span. The deadline was set for Sept. 30 to end and complete all transactions with the dealers involved in the CARS program.

Toyota accounted for nearly 20 percent of the sales, followed by GM with 17.5 percent. Ford totaled 15 percent, Honda totaled 13 percent and Nissan 8.7 percent, to round out the top five.

The Clunkers program began in July of 2008. The bold action, in their view, would “deliver on the promise of improving the environment,” stated Transportation Secretary Ray LaHood. His goals for the program included boosting economic growth in the third quarter of 2009 by .3 to .4 percentage points and sustaining the increase in Gross Domestic Product through the fourth quarter with the increase in auto production from American companies.

As Americans respond to the need for jobs, the Transportation Department is attempting to create or save 42,000 jobs in the second half of 2009. Given the economic situation in this country, that is welcomed news to average Americans.

LaHood stated publicly that the program has been “wildly successful,” but there are those who question the effectiveness of the government in running such a program. These goals and their success have continually been debated along partisan lines but there are those who run dealerships across the country whose livelihoods depend on the Obama administration and its plan for this program and the car industry as a whole.

In order to have qualified for the CARS program, the vehicle must have been less than 25 years old on the trade in date. Only purchase or lease of new vehicles qualifed, also trade in vehicles must have gotten 18 or less MPG (this does not include pick-ups and SUV’s). Clunkers must have been registered and insured for the full year preceding trade in.

The National Automobile Dealers Association (NADA) has placed pressure on the Transportation Department for its lack of efficiency on the reimbursement process.

NADA, founded in 1917, deals in funding for dealers across the country, research and data for the car industry. A survey done by NADA, which included 800 dealers, found that 97 percent of dealers thought the reimbursement process was not moving along at a fast enough pace. Nearly 13 percent dropped out of the program as a whole, 16 percent of applications submitted have been rejected, while 40 percent don’t want the program to continue.

Most importantly, 25 percent of dealers are experiencing severe short term cash flow problems that require loans to survive while they wait for reimbursement.

As of right now, over 690,000 cars have been purchased under the program. The average rebate was $4,170 totaling $2.878 billion; the average new car gets 9.2 mpg more than the average clunker traded in, saving an average 277 gallons of fuel per driver a year.

LaHood commented that “…it [had] been a thrill to be part of the best economic news story in America,” in a news conference regarding the announcement on August 20.

The lull in September has consumers and dealerships curious as to how fourth-quarter numbers of 2009 will play out.

“We believe consumer traffic at dealerships evaporated in the absence of the incentive program,” wrote Standard & Poor’s equity research analyst Efraim Levy.

“However, we expect the September lull to be temporary, as the comparisons get easier and we see the economy improving.”