NAPLES — Their gas mileage is dreadful. The old ones sometimes creak and shake. Some require constant care. They are the dregs of the automotive market.
They’re clunkers: Old cars, with bad fuel efficiency and a worse reputation. And, for the time being, they’re worth a lot of money.
Since its start last week, the Car Allowance Rebate System (CARS), formerly known as the “Cash for Clunkers” program, has boosted business significantly for many local new car dealers who are seeing trades that might have been near worthless just a week ago turn into huge down payments on brand new, more fuel efficient cars for cash-strapped customers.
“So far it’s going very, very well,” said John Burke, general manager of Germain Honda Naples on Monday. “It’s like cash down on a purchase.”
It’s $3,500 to $4,500 cash, to be specific, depending on the type of car purchased and the difference in fuel economy between the trade and the new car. The trade-in cars in question must, with some exceptions, get under 18 miles to the gallon, be less than 25 years old and be insured for one year prior to the trade.
The goal of the program: To take old gas-guzzlers out of commission, permanently. The clunkers traded in as part of the program are disabled immediately, and later destroyed and recycled.
Clunker today, gone tomorrow?
After CARS got off to a fast start, a recent bump in the road left some customers and dealers pumping their brakes.
All was not well in the newly-established clunkers game on Tuesday, when several media organizations reported that the Environmental Protection Agency had abruptly altered its fuel economy ratings, upping the ratings for some vehicles and potentially rendering some of the borderline clunkers, those that just barely met the 18 mile-per-gallon standard, suddenly ineligible for the program.
Nationally, unconfirmed reports abounded from customers who had traded a clunker before the switch and were now being asked to trade back, or pay back the hefty $4,500 that Uncle Sam was no longer willing to shell out.
The EPA released a statement Tuesday, explaining that the change was necessary because, “Unlike the previously available mileage data, which was solely intended to guide consumers’ vehicle purchases, more precise data is required by the new CARS legislation (to four decimal places).”
The statement indicated that the change had been made on Friday, July 24, and explained that, of the 30,000 possible combinations of make, model and year involved in the program, only 78 were disqualified as a result of the new ratings. Also, 84 other vehicles, previously deemed ineligible, became eligible for the CARS rebate.
Tim Wheeler, sales manager at Tamiami Ford in Naples, said that he rushed to recheck his clunkers Tuesday, only to find himself unable to print off the new list of eligible vehicles.
“The (CARS) Web site was all screwed up,” said Wheeler, who reported that, once he was able to print the list, he was relieved to find that his clunker inventory checked out.
“We’re A-OK,” he said.
From Canada with clunker
Dianne Sage had just gotten back from Canada, and didn’t know anything about Cash for Clunkers.
Her brother-in-law told her about the program on Wednesday morning. She was driving a brand new Honda Civic by the afternoon.
“I was going to trade my van in the fall,” said Sage, who, until Wednesday, drove a 2002 Dodge Caravan. Her car certainly qualified for the program; Sage said it got only about 11 miles to the gallon.
Sage, 63, had shopped around for used cars, but had found offers of $2,500 for her van to be “insulting.”
With the government program, she got a brand new car for just $2,000 more than she would have paid for a used one.
She called the Car Allowance Rebate System fabulous, but didn’t think of it as a handout.
“As a tax payer, I know I’m paying for it anyway,” said Sage. “I might as well take advantage of it.”
And despite being quite happy to have her new car, Sage expressed some concerns about the government program that helped pay for it.
“The thing that hurts my feelings is that they’re going to destroy perfectly good cars,” Sage said.
Unlike some with so-called clunkers, Sage didn’t have any ill will toward her old vehicle. She said that, but for the cost of gas, she would have held onto her van, which she said still worked fine.
Though she worried that the program would hurt used car dealers, and waste a lot of still-working clunkers, Sage said she would recommend that anyone looking to trade in an old guzzler get out while the program lasts.
“Most certainly,” said Sage, “if they’re in the market.”
Time running on empty?
It’s a given that Cash for Clunkers won’t last forever, and, according to local dealers, it probably won’t last for long.
The program is scheduled to run until Nov. 1, or until the $1 billion allotted to the program runs out.
Local dealers are not too hopeful that the money will last until the deadline.
“We’re anticipating the money running out much quicker,” said Burke.
As a result, Burke and his employees have been contacting former customers with eligible vehicles and urging them to take advantage of the program while it lasts. His haste is based in observation; in the short time since it started, his dealership has sold about 12 to 14 vehicles under the new program.
“I think the funds will be exhausted long before Nov. 1,” said Wayne Gratkowski, general sales manager for Naples Dodge Chrysler. On Monday, Gratkowski said his dealership has sold 12 vehicles since the start of the program, nine of which were the result of the cash for clunkers program.
“That’s pretty good, that’s more than I expected,” said Gratkowski. “It’s been pretty brisk. ... I would encourage people to hurry up.”
According to the program’s official Web site, CARS.gov, $858 million of the initial $1 billion allotment remains.
Used car blues
Even before the most recent hiccup, some in the auto industry were none too gassed about CARS.
While some dealers are enjoying increased business, some in the used car game are feeling left out by a program that only rewards new car sales.
“We think its going to affect our business,” said John Hahnl, sales manager of Lance Motors in Naples. Hahnl said the program presents both long term and short term problems for the used car industry.
“It’s going to take a lot of these used cars off the road,” said Hahnl, a fact that he said could drive up used car prices in the long term. He said that, in the short term, the program is driving prospective buyers to new car dealers, and away from his lot.
“This thing was definitely designed for new car dealers,” said Hahnl. Asked whether he thought used car dealer were left out in the cold, he answered succinctly.
“Without question,” he said. Hahnl said he was already seeing a slowdown, and worried it would get worse.
However, Burke, whose dealership also deals in used cars, downplayed any expected damage to his pre-owned business.
“We really don’t anticipate it to hurt us right now for sales,” said Burke, citing a recent increase in used car sales that he attributed to economic concerns among consumers.
“I think it’s the mental perception of the auto industry in general,” Burke said.
Whether used car sales will be affected long-term remains to be seen, but, according to local dealers, some of the clunkers being traded truly live up to the name.
“They’re clunkers,” said Gratkowski.
■ Your vehicle must be less than 25 years old on the trade-in date
■ Only purchase or lease of new vehicles qualify
■ Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)
■ Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in
■ You don’t need a voucher, dealers will apply a credit at purchase
■ Program runs through Nov. 1, 2009 or when the funds are exhausted, whichever comes first.
■ The program requires the scrapping of your eligible trade-in vehicle, and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.
Data courtesy CARS.gov