Used car dealers denied CARS windfall

KOKOMO, Ind. (Kokomo Tribune) - Without a doubt, the federal government’s Car Allowance Rebate System has been successful.

In its first week, the program burned through $1 billion, necessitating the government to loan it an additional $2 billion.

The program allows customers to trade in an older, less fuel-efficient vehicle for a new one that gets better fuel economy.

New car dealers sold almost 28,000 vehicles.

But that success hasn’t been seen in other branches of the automotive industry.

With the CARS program, those cars aren’t going to used car dealers. Those dealers and auto-salvage yard owners say the used cars they would typically receive are going to the scrap heap, which causes both industries to suffer.

With the moniker “cash-for-clunkers” taken, used-car dealers don’t require a fancy name, they just want to see some cash.

To conserve money, without customers in The Auto Park office, Susan Rhinebarger sits in her office without running an air conditioner.

Her company recently opened three other locations in the state, but in an effort to save, they no longer offer customers free Car Fax reports.

Traffic at her 800 S. U.S. 31 location has slowed since the program began, and while new-car sales have exploded, she and others would like some residue from that explosion.

“Steps one and two of this is just end it,” said Rhinebarger. “It’s been slow the last week. I am used to selling cars. There is a market for used cars. I offer fair deals. But [new car dealers] are offering deals I can’t offer.”

According to the Adesa Auctions, the leading provider of vehicle auctions and remarketing services for institutional customers and automotive dealers, 3,198,965 used cars were sold in June, an increase of 4.1 percent from the same time in June 2008.

June was the fourth consecutive month used-car sales increased. The average used vehicle cost was $10,167.

With customers having an incentive and money to buy a new car, Matt Hoover, Button’s used-car manager, said used-car sales are down because customers can get “a lot more for a trade-in than we can give them. How can you justify buying a used car when you can get a new one?”

Mark Scott, senior manager of media relations for Autotrader.com, said his Web site’s survey before CARS began indicated 69 percent of its visitors were aware of CARS and, of that percentage, 19 percent were going to use it and another 19 percent were willing to look further into it.

As a result, he sees CARS’ good-and-bad points.

“It’s a great opportunity for the automotive industry because dealers were able to move metal off their lots, and Ford is increasing its third-quarter production,” Scott said. “That’s a good thing.

“Looking at the economy, people paid for cars but they scaled back on other purchases. Not everyone qualifies for [a new-car] loan, and you are going to still need a car. The cars used in the program used to be sold as a used car, now, those used cars are gone. No one thought it would be this dramatic. It was bigger than expected.”

Knowing he can’t compete with new-car sales, Brian Adams is invoking his own incentive plan to attract customers to his Adams Auto Group locations: “Cash for Caring.”

Anyone who brings in a grocery bag of non-perishable items receives $500 off the purchase of a used car.

The items will be donated to local non-profit organizations. His program isn’t about making Adams see bigger sales or for publicity, but it is about giving and helping the community, he said.

With CARS’ success, however, he’s still puzzled why, “I have to pay my tax money so they can use it and take my money away.

“They slammed us. We are the industry’s cash cow. The money from our sales is money that stays in the community. It’s unbelievable what business pre-owned cars create.

“The last two weeks have been brutal. It’s an impulse to buy a car, and with Cash for Clunkers, people are waiting for deals. It eliminated a lot of good vehicles and sent them to an early grave.”

Buried with the car are parts salvage yards need.

“It’s going to raise the cost of parts,” said Warren Pearce, owner of Warren’s Auto Salvage at 1105 Home Ave. “There are some who can’t afford to buy a car, so they fix it. They want to pull unsafe cars off the street but now they are driving cars that have been parked in the backyard. Someone didn’t think about the big picture. Not a lot of time and thought was put into this.

“It’s going to be supply-and-demand for parts, and it’s going to raise the costs.”

An ancillary aspect of the automotive community that hasn’t been “immediately impacted” by CARS’ success is people donating vehicles to Goodwill.

With the rocky economy, Cindy Graham, Goodwill’s vice president of marketing, believes the company isn’t seeing more vehicles donated because “people are holding onto their cars a lot longer.

“We average about 1,500 a year. We are holding our own. We haven’t seen a significant decrease.”