‘Cash for clunkers’ a hit here

Published 8:49 am Wednesday, August 12, 2009

FRANKLIN—The wildly popular Car Allowance Rebate system, better known as “cash for clunkers,” has led to booming sales at car dealerships across the nation and in Franklin.

“It’s definitively caused a lot of excitement and people coming in to inquire about it,” said Blake Blythe, the owner of Blake Ford Mercury in Franklin. He said that his dealership has sold 12 vehicles through the program.

The federally funded program, which started in late July, allows new car buyers to receive a discount of up to $4,500 toward a new car if they trade in their “clunker.” As simple as it may sound, the process is very complicated, according to local car dealers.

“There’s a lot of paperwork that goes along with it,” said Rick Romesburg, general manager of the Mike Duman General Motors dealership in Franklin. There is also a long list of qualifications that the consumer’s trade-in must meet and another list of qualifications that the new car must meet in order to be eligible for the discount.

Romesburg estimates his dealership has sold about 15 vehicles through the program.

“Clunkers” that are traded in cannot be resold. Dealers are required to drain the oil from the engine and pour a solution of sodium silicate into the engine, which disables the vehicle. It’s then towed to a salvage yard, where it can be used for parts and is eventually destroyed. Dealers are paid the salvage value of the vehicle, and the money is used to cover the cost of disabling the vehicle.

The program’s two-pronged goal is to stimulate the auto industry and help get gas-guzzling vehicles off the road. There are strict guidelines when it comes to the fuel efficiency of new vehicles purchased under the program.

“We have to plug the numbers in to see if they are eligible,” Blythe said. “It’s all driven by fuel economy; anything under 18 miles to the gallon doesn’t qualify.”

The popularity of the program has led to a problem that car dealers haven’t had in a long time — more demand than inventory.

“The problem I have is I’m running out of cars,” Blythe said. “We have a lot of interest but no cars to sell them.” He has put in orders for more of the popular small, fuel-efficient vehicles, but acknowledges that there’s a chance he won’t get them because there are shortages at dealerships nationwide.

Typically, if a customer wants a car that’s not in stock, Blythe contacts another Ford or Mercury dealership that does have the vehicle, but that’s not the case now. “Other dealers won’t let you have anything,” he said.

Romesburg said that inventory problems could start at Mike Duman “in another week, if it stays like it’s been.”

Neither dealership had received any reimbursement from the federal government as of Monday, but Blythe and Romesburg are confident that they will get their money back.

“It’s been very complicated,” Blythe said. “Right now they owe us over $50,000 and we haven’t gotten any money.” He said that he was uneasy about the amount of money he is owed before Congress voted to give the program an additional $2 billion last week. The additional money is expected to keep the program running until Labor Day.

While new auto sales are up, Romesburg said that the program has cut into the used-car business at Mike Duman, and he is concerned about what will happen when “cash for clunkers” runs out of money.

“We’re forcing the market,” he said. Romesburg said that the program is pushing people who would’ve waited for a few months to buy now, which will lead to a big slowdown down the road.

“At this point it’s successful,” he said. “But time will tell.”

Blythe agreed, and said that the program would’ve been better if the money hadn’t been doled out all at once.

“It’s been a very good program,” he said. “I just wish they had taken the money and distributed it on a quarterly basis, which would’ve enabled the factories to stay busy and given us time to have inventories built up.”

Both Blythe and Romesburg said that their business was good before “cash for clunkers,” but the program has helped increase sales volume.

“Whatever we’ve gotten, it’s been a blessing,” Blythe said. “It definitely has helped business. There’s no question it’s got us stimulated.”