Cash for Clunkers not a hit with used-car dealers, auto collectors
Posted: Friday, August 14, 2009
By Mark Golver, The Sacramento Bee
The federal Cash for Clunkers program has thawed an otherwise icy new car market, but not everyone is feeling the warmth.
Numerous auto collectors, advocates for the poor, used car dealers and nonprofit organizations that make money on donated cars have been decidedly cool to the Car Allowance Rebate System program that prompted many Americans to buy a new car in recent weeks. Environmental and consumer groups also have raised concerns.
It's a cautionary tale that has plentiful precedents in the nation's car-obsessed history: Any movement in the massive auto industry typically produces unwanted ripples elsewhere.
Advocates for the poor have complained that some of the clunkers being turned in, never to be used again, could have supplied basic transportation to needy individuals who can't afford to pay for even a moderately priced used car.
For example, Katina Rapton, general manager of Mel Rapton Honda in Sacramento, noted that while her dealership took in an eye-popping 80 clunkers in exchange for new Hondas from July 27 through Tuesday, the dealership's used car operation suffered by comparison.
"We've just been so busy with Cash for Clunkers that the used side sort of slipped," she said. "I can't complain. I know it will come back. It's a cyclical business."
U.S. auto industry analysts have estimated that three out of every five clunkers turned in by consumers attracted by government rebates would otherwise have ended up for sale on a used car lot.
Advocates for the poor have complained that some of the clunkers being turned in, never to be used again, could have supplied basic transportation to needy individuals who can't afford to pay for even a moderately priced used car.
Likewise, car collectors and entities that actively seek donations of old cars say they would rather restore clunkers or turn them into a revenue source, instead of seeing their drivetrains destroyed and their remains chopped up for parts and scrap.
The California Automobile Museum in Sacramento does both: It accepts car donations to raise money and restores autos for display.
"I would definitely say that the Cash for Clunkers program has affected our vehicle donation program," said Karen McClaflin, executive director of the museum. "Vehicle donations for the museum are way down, and while we could probably attribute some of that to the economy, there's no doubt that some would-be donors are trading in their older cars for the cash in hand rather than the tax deduction.
"We also have an additional concern that collector cars – possibly having an even higher value than the Cash for Clunkers deal – potentially are being traded in and crushed, forever lost to future generations of car lovers and collectors," McClaflin continued.
"We don't know what cars will eventually be collectibles in the future. There are car clubs out there that collect Pintos, Pacers, K-Cars and Yugos. These cars are a part of history, and once they're gone, they're gone, which is really a shame."
The Diamond Bar-based Specialty Equipment Market Association, a trade group representing 7,358 companies that sell aftermarket auto parts worldwide, opposed Cash for Clunkers when it was proposed earlier this year, saying it wanted to "work with lawmakers to find ways to minimize the harm a motor vehicle scrappage program will needlessly impose on thousands of independent repair shops, auto restorers, customizers and their customers across the country."
In the end, SEMA did get a concession from the government: The clunkers program excludes vehicles built before 1984.
On Thursday, advocacy groups weighed in with more concerns about Cash for Clunkers.
Sacramento-based Consumers for Auto Reliability and Safety joined other U.S consumer groups calling on the U.S. Department of Transportation to crack down on dealerships allegedly pressuring consumers into questionable terms in clunker deals. They said this included getting customers to sign agreements forcing them to repay their federal rebate if the dealership is not reimbursed for a sale.
Rosemary Shahan, president of Consumers for Auto Reliability and Safety, called this "a form of bait and switch."
Environmental groups also expressed alarm that some of the top sellers among vehicles purchased via government subsidies include large sport-utility vehicles and pickup trucks – flying in the face of the Obama administration's goal of getting more fuel-efficient cars on the road.
Edmunds.com, the Santa Monica-based auto information site, noted that one of the top new vehicles being purchased through the clunkers program is the Ford F-150 pickup, which gets less than 20 miles per gallon.
Other auto industry insiders blame Cash for Clunkers for a rise in new car prices, because the sizable rebate and increased consumer demand give dealers little motivation to sweeten a deal.
"Since the program launched, we've seen that shoppers are getting less of a discount off sticker price for new cars," said Michelle Krebs, an analyst with Edmunds.com.
"In some cases, they are choosing less expensive trim levels and option packages than had been typical in recent months, but paying more for them."
The Bethesda, Md.-based Car Care Council believes the buying rush prompted by Cash for Clunkers caused consumers to lose sight of the value of a well-maintained vehicle.
"The fact is that Cash for Clunkers is only going to benefit a very small fraction of American consumers," said Rich White, the council's executive director.
"It's important to remind motorists that those who treat their vehicles as valuable investments and commit to regular vehicle maintenance end up saving a lot of money."
Citing data from Runzheimer International, a Waterford, Wis.-based management consulting firm specializing in transportation, White said consumers will save $10,000 over a four-year period by keeping an existing car rather than buying a new one.
"Even with the Cash for Clunkers incentive, maintaining your current vehicle is the best economic option," White said.
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