The federal government’s “cash for clunkers” program could end up hurting some local small businesses by driving down the price of scrap and parts and making it harder for low-income people to find an affordable used car, several business owners said Tuesday.
The idea of giving between $3,500 and $4,500 off the purchase price of a new vehicle has been a boon for Detroit’s automakers. But many of the so-called clunkers — which must have their engines destroyed as part of the transaction — are nicer vehicles than those driven by Steve Spaulding’s employees at Bill’s Auto Parts, Spaulding said. “This is a bad program,” he said. “It’s going to hurt so many people. It’s going to kill the scrap market … and the guy who wants to buy a $4,500 vehicle, because they are going to be gone.”
Jennifer Johnson, owner of Jennifer’s Auto Sales & Service at 15020 E. Sprague Ave., said her used-car sales died the first three days the program became available.
“It’s going to put a big hole in the industry in a lot of ways,” she said. “I don’t know where we are going to get the $3,000 and $4,000 cars that parents want to buy for kids when they go back to school. People will be paying a lot more for used vehicles or they will be taking the bus.”
The intent of the program is to boost consumers’ willingness to purchase more fuel-efficient vehicles. But the program may have the effect of eliminating three or four other transactions that keep local businesses open, said Spaulding, whose company is located at 4203 E. Weile Ave.
When someone buys a new car or truck, he or she typically trades in an older vehicle. Dealers then sell that used car or send it to auction, where it’s purchased and sold by a used-car lot. When the next person buys that trade-in, they typically trade in another car of lesser value, thus making an ongoing market for ever-cheaper cars.
But the federal program requires that the “clunker’s” engine be destroyed, leaving a hole in the used-car market that can’t be replaced, Spaulding said.
“The only thing you helped was the guy on commission at the dealership,” Spaulding said. “I think it’s going to hurt the small dealerships. And they’ve had a really bad year.”
Johnson said the program serves to give people enough money to convince them to go into debt for five or six years.
“I thought the whole point was to get people out of credit problems,” she said. “We wave a big carrot in front of their nose and people want something new, but can they really afford it?”
She also believes the program was designed to get rid of unwanted junkers, “but unfortunately, we are seeing some beautiful trade-ins destroyed,” she said. “It’s just a huge waste of inventory that could be re-used and re-sold.”
Russ Spaulding, who owns the 50-acre Spaulding Auto Parts in Spokane Valley, said his business has already purchased about 50 of the local trade-ins from cash-for-clunkers sales. He expects that number to reach about 300 within the next two months.
While the government originally called for the entire car to be destroyed, it changed course to allow parts to be sold. As a result, anyone trying to fix an older car during the foreseeable future should expect to find the cheapest parts in decades, Russ Spaulding said.
“We are going to receive these vehicles sooner or later, but we are now getting them sooner. And they are not something you would find beaten up on the side of the street. We are getting a lot of nice vehicles right now,” said Spaulding, who is Steve Spaulding’s brother.
Cheaper parts will help the owners of older cars eke out a few more thousand miles before the grim wrecker comes calling, Steve Spaulding said — especially important if used-car prices climb, as expected.
“When things are good, people buy third or fourth cars,” he said. “When times are bad, they keep things running.”