August 1, 2009 in City

Clunkers program refueling

House votes another $2 billion for qualified trade-ins, and Obama favors it; Senate vote next
By The Spokesman-Review
 
Colin Mulvany photo

Wendle at the Y lot attendant Stephen Hastings writes “Clunker” on the windshield of a pickup truck recently traded in as part of the “cash for clunkers” program Friday. The federal program has sparked a dramatic increase in new car purchases across the country.
(Full-size photo)

After a day of on-again, off-again news regarding the “cash for clunkers” program, auto dealers are back where they’ve been for the past week – busy at last.

Car buyers here and across the country overwhelmed the program, gobbling up the initial funding of $1 billion in less than a week. But Congress moved to triple that funding Friday, and the White House pledged the program is still in effect.

“Ford’s telling us to just keep going,” said Gus Johnson, owner of the Spokane dealership that bears his name, on Friday as lawmakers scrambled. “It sure shows you there’s a lot of pent-up demand.”

The program offers incentives of $3,500 or $4,500 to people trading in old gas-guzzlers for new cars that get better mileage.

The House of Representatives voted 316-109 to put another $2 billion into the program, taking the money from a stimulus-backed Energy Department loan guarantee fund. The Senate is expected to consider that plan next week before the August recess.

President Barack Obama said he supported extending the program, which helps consumers, the environment and the auto industry while reducing U.S. dependence on foreign oil. The program aims to yield up to 250,000 trade-ins per $1 billion in federal assistance.

“Not more than a few weeks ago, there were skeptics who weren’t sure that this cash for clunkers program would work,” the president said. “I’m happy to report that it has succeeded well beyond our expectations and all expectations, and we’re already seeing a dramatic increase in showroom traffic at local car dealers.”

Andy Keys, general sales manager at Wendle Auto Group in Spokane, said the program has given his dealership a big boost. By midday Friday, his dealership has made some 30 cash-for-clunkers sales, and more than twice that many total sales this week. He said the rush started immediately when the program took effect a week ago.

“We were just absolutely overrun (last) Friday,” he said. “We had 70 or 80 customers in and delivered 13 or 14 cars.  … It’s definitely generating a lot of traffic.”

At Gus Johnson Ford, the number of calls from potential customers went up fourfold this week; last weekend brought the strongest sales in four years, Johnson said.

The program’s focus is replacing gas-guzzlers with fuel-efficient cars, but some critics argue that it allows a lot of new pickups and SUVs to be sold. The way the price breaks work is based partly on an improvement in gas mileage – if your new car gets 4 mpg to 10 mpg better than your old one, you qualify for $3,500. If the difference is 10 mpg or better, you get $4,500.

But with most pickups and SUVs, an improvement of 2 mpg qualifies for $4,500.

Keys and Johnson both said they’ve been surprised by the number of trucks or SUVs they’ve sold.

Johnson said he initially expected small, high-mileage models would be the big sellers.

“I thought we’d really sell a lot of the Fusion and Focus,” he said. Instead, “we have completely sold out of our Ford Escapes,” which are midsize SUVs.

Keys said his dealership has sold more pickups than he expected.

Marc Cannon, a spokesman for AutoNation, said the program had showrooms hopping at the company’s 239 locations in 15 states. AutoNation dealerships have sold 3,000 cars under the program and showroom traffic is up 36 percent.

“We’re seeing a tremendous amount of interest,” Cannon said. “It’s like people have been given permission to shop for a car. It’s a huge psychological boost.”

Most buyers are either pre-qualified with credit, are paying cash or have credit union backing, Cannon said. Buyers with poor credit, however, are having a tough time because credit is still tight.

Amid the excitement, a vehicle finance advocacy group dubbed AWARE – Americans Well-informed on Automobile Retailing Economics – said that consumers shouldn’t lose sight of getting the best financing deals they can. The group offers a budgeting calculator and advice on contracts and negotiations on its Web site, www.AutoFinancing101.org.

The Federal Trade Commission, meanwhile, warned consumers to steer clear of bogus “cash for clunker” Web sites that ask for personal information, supposedly to register for the program. Such scams typically are used for identity theft and related crimes.

There’s only one official government Web site for the program, www.cars.gov. The site doesn’t ask for personal information. Consumers who find bogus “cash for clunkers” Web sites that seek personal information should notify the FTC at www.ftc.gov, or (877) 382-4357.

McClatchy Newspapers contributed to this report.


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