Cash 4 Clunkers had its hiccups but helped the economy, local dealer says

Written on December 13, 2009 – 11:27 am | by Admin

CORPUS CHRISTI ? The Cash 4 Clunkers program didn’t go as smoothly as the federal government planned. But a local car dealer said the trade-in program accomplished its goals of helping revitalize the national economy.

The $3 billion federal program, officially named the Car Allowance Rebate System, was intended to stimulate the economy by boosting auto sales by encouraging owners of older, less fuel-efficient vehicles to trade them for newer, more fuel-efficient models. Upon meeting the criteria for a clunker, the owner received a $3,500 or $4,500 voucher, to be used toward the down payment or price of a new vehicle.

Although upgrading to newer vehicles put safer, cleaner and more fuel-efficient vehicles on the roadways, this was not the government’s primary goal.

Charlie Hicks, general manager of Ed Hicks Nissan, said the problems started early. Sales under the program began July 1, but claims were not allowed to be submitted until the final program rules were determined.

The $1 billion in federal money funding the program was expected to last through Nov. 1, but rumors began circulating by July 31 that the money was going fast, Hicks said.

“Even after the additional $2 billion of funding was approved in early August, the volume of claims continued to outpace the government’s expectation,” Hicks said. “The claims process was rather intensive as each claim required about 21 pages of documents. Many rejected claims had to be resubmitted and we found a number of those rejections were clerical errors on the part of claims processors.”

Several other are car dealers declined to discuss their experiences with the program.

The vouchers customers received and used to purchase a new vehicle were covered by the dealers until the government reimbursed them. Government officials said that turnaround time would be 10 days, but many dealers waited much longer.

Hicks said the average claim was paid in 26 days and the longest delay was 76 days. The delay put a financial strain on the dealers, he added.

“(Dealers) had to wait for payment after extending the amount of the rebate to the customer,” Hicks said. “In our case, we had 136 clunkers traded in, 365 new Nissan sales and $588,000 in total rebates to our customers. We had to finance that money until we received the rebates.”

The program was a success for both the customers and the automotive industry that was struggling to survive, Hicks said.

“The automotive plants that had been idled as a result of lower industry sales volumes were able to ramp production back up and put thousands of plant and supplier workers back on the job,” Hicks said. “The trucking industry that transports most vehicles started moving again and the automobile dealerships across the country saw an immediate infusion of customers looking to take advantage of the program.”

Nissan restarted its idled production lines for vehicles that qualified under the CARS program. Plants that produced the Altima, Sentra and Versa models began producing in June in anticipation of legislative action.

“The employees in our dealerships stepped up to meet the new demand and many worked overtime to process the volume of sales,” Hicks said. “In August, we recorded a record sales volumes with 227 new Nissan sales. So much of the stimulus package investment has been difficult to quantify, but I believe the program exceeded everyone’s expectations. It put thousands of American back to work that had been idled as a result of the economic downturn.”

The U.S. Department of Transportation is in the process of compiling the final data on the Cash 4 Clunkers program, officials said. The latest data on the program was released in August and officials don’t expect to release new data until January.

According to the information released on Aug. 26, Dealers had submitted more than 690,000 transactions worth about $2.9 million.

The most popular new car purchased was the Toyota Corolla followed by the Honda Civic. The top two traded-in vehicles were Fords, the Explorer 4WD and the F150 pickup 2WD.

About 84 percent of trade-ins under the program were trucks and 59 percent of new vehicles were cars. Gas mileage increased by an average of 9.2 miles per gallon, or 58 percent, from the traded-in average of 15.8 miles per gallon to 24.9 miles per gallon.

Scripps Howard News Service compiled state-by-state data on the program.

According to its report, Texas had 42,917 transactions worth more than $970 million. It was second to California, which had 76,481 transactions totaling $1.7 billion.

BY THE NUMBERS

Trade-ins

- 835- number of clunkers

- $3,500-$4,500- range of value

- 1984- year of the oldest

- 2005- year of the newest

- 9,200- lowest mileage

- 424,267- highest mileage

- 675- vehicles with mileage over 100,000

New vehicle purchases

- 1- year 2007

- 9- year 2008

- 682- year 2009

- 143- year 2010

- 15- lowest mileage

- 50- highest mileage

- $10,990-$44,495- range of manufacturer suggested retail price

Source: Scripps Howard News Service; U.S. Department of Transportation

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