Cash for clunkers could increase new car sales by twenty percent

  Vicki Duckett put herself behind the wheel of a new car Friday, and a $4,500 rebate from the federal government helped get her there.

Duckett, of Boise, took home a 2009 Hyundai Sonata, which gets about 25 miles a gallon, while giving up her 1993 Mazda Navajo, which she says gets only 13 miles a gallon.

“It’s a huge gas savings,” said Duckett, who is buying from Bronco Motors in Boise. “It kind of all worked out for us.”

Duckett is among the Idahoans taking advantage of the federal government’s Car Allowance Rebate System – dubbed “cash for clunkers” – which gives new car buyers up to $4,500 off qualified vehicles if they trade in their gas-guzzling older models. Dealers get a small fee for handling the clunkers, which will be subject to strict salvage rules that ensure the engines will be destroyed.

Dealers began registering Friday with the federal government to qualify for the program. The government Web site collapsed under the pressure of too many people trying to sign on at the same time, a National Highway Traffic Safety Administration spokesman said.

New-car dealers, which have seen anemic sales for much of the past year, think the clunkers rebate could increase business up to 20 percent. Used-car dealers think the rebate could raise the prices of older models as vehicles that otherwise might have gone to their lots go to salvage instead. And iSuppli Corp., which follows the auto tech market, worries that the bump in sales today could steal from sales later, when the country begins to emerge from the recession.

Some dealers laud the program for putting real money in the hands of consumers.

“It will help the producers, American consumers and employment,” said D.J. Wiebold, general manager of Dan Wiebold Ford in Nampa.

By Friday afternoon, Wiebold already had 10 customers ready to buy new cars and dump their old ones. Grant Petersen Jr., president and CEO of Bronco Motors, which sells Nissans and Hyundais, had 25 potential sales lined up.

Petersen said his dealership has been making conditional sales with customers who have qualifying vehicles and the right paperwork for the program. They can take home new cars while Bronco Motors awaits word on its expected certification to be a part of the federal program. Wiebold is taking deposits on cars that people hope to get under the program.

While the government hopes to take about 250,000 old cars off the road, not every old vehicle qualifies.

Most vehicles must be from the 1984 model year or newer. Nathan Herren’s 1978 F150 Ford pickup is too old. He jokes that his truck gets 10 miles to the gallon on a “good, mostly downhill travel day.”

If the truck qualified, it might have headed to the boneyard. “$4,500 is nothing to sneeze at,” said Herren, who lives near Eagle. “That is way better than even a down payment.”

Cash for clunkers, however, did get Duckett out of her normal shopping place for vehicles: used-car lots. Between the government rebate and dealer incentives, she figures she has saved about $8,000 on the cost of her new car.

“I can see how this is an effective part of the stimulus,” she said.

Used-car customers seem to be a main target for the rebate, Wiebold said. Wiebold is offering a 2009 Ford Focus for $8,995, about $7,000 off the retail price with the government rebate and other incentives. “You can’t buy a used Focus for that,” he said.

Used-car dealers aren’t sure how the rebate for new cars will affect them. Petersen thinks older-model used cars will hold their value “because the supply is going to go away.” But for people looking for that $2,000 used car that will drive until it drops, the hunt may take longer than usual. “Those cars are not going to be easy to find,” Petersen said.

Duckett plans to have her new car any day. She’s pleased with her deal.

“I love this,” she said. “My car is only worth about $1,000.”

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