'Cash For Clunkers' Program Takes Off

July 24, 2009|By Eileen Ambrose | Eileen Ambrose,eileen.ambrose@baltsun.com

Maryland auto dealers are prepared today to give new car buyers up to $4,500 for their old gas-guzzlers under the government's "cash for clunkers" program designed to protect the environment and boost the troubled auto industry.

"Anything in this market that improves ... sales, you got to get a little excited over," says Bob Bell, owner of Bob Bell Automotive Group. The dealership has more than a dozen traded-in clunkers on its lot waiting for their owners to pick out their new vehicles.

The "cash for clunkers" program, officially named the Car Allowance Rebate System, was signed into law a month ago, and government officials have until today to post the details online. Dealers can start registering today for the program, under which consumers can get $3,500 or $4,500 off the purchase or lease of a new fuel-efficient vehicle if they scrap their old heaps. The incentive applies to car and truck purchases made between July 1 through Nov. 1, or until the $1 billion in federal funding dries up.

Ever since the legislation was passed, there has been confusion over which vehicles qualify, when and how dealers will be reimbursed, and what needs to be done to prove the vehicle has been scrapped as required by law. Auto dealer associations have advised their members to wait until the government issued final regulations before giving out the cash incentives or risk not being reimbursed if a vehicle didn't qualify for the incentive.

Some haven't waited. Hyundai, for example, started making short-term cash advances to dealers early this month to give to consumers trading in an old car for a new Hyundai. Bell says his dealership sold a dozen Hyundai vehicles this month that were eligible for the cash incentive.

The official Web site for information on qualifying vehicles and participating dealers is www.cars.gov. The National Highway Traffic Safety Administration has warned against Web sites that appear to be affiliated with the program but are "phishing" for personal information.

Jose Ucles, a spokesman for the government highway administration, advises consumers to wait until dealers are certified to participate in the program, which could be the start of next week, before signing to purchase a vehicle. Consumers can check the government's Web site for certified dealers or ask the dealer to see its certification, Ucles says.

He also warns consumers against signing any paperwork promising to reimburse the dealer for the cash incentive if the government doesn't.

But Peter Kitzmiller, president of the Maryland Automobile Dealers Association, says consumers don't need to wait. Most Maryland dealers are expected to participate, and the dealers - not the consumers - will be on the hook if they give out cash for a vehicle that doesn't qualify for the program, he says.

"The dealers are going to want to get people in the program as quickly as possible," Kitzmiller says. His group is posting the names of Maryland dealers registering for the program on its site at www.mdauto.org.

Dealers and manufacturers view the program as a chance to jump-start sales and have been offering additional incentives, Kitzmiller says. "There are very, very large rebates across the board," he says.

Chrysler, for instance, recently announced it would match the government's incentive or offer 0 percent financing for consumers who turn in a clunker and buy a 2009 model. This Chrysler incentive runs through August and also will apply to trade-ins that don't qualify for the government program.

Annual auto sales are running about 9 million, compared with about 17 million in good times, Bell says. But dealers say the clunkers program is generating interest among consumers.

Customer traffic at the dealership picked up by 30 percent to 40 percent since the program was signed into law last month, says Russell Martin, new-car sales manager at Koons Ford of Baltimore. Martin says he has had preliminary paperwork filled out for about a dozen customers who plan to take advantage of the program.

Critics, though, say cash for clunkers will generate only about 250,000 auto sales and that the criteria to qualify for the cash incentive is too narrow to have widespread impact. Besides, the rules are complicated. For instance, a trade-in vehicle must have a combined fuel economy rating of 18 miles per gallon or less. Buyers will get $3,500 or $4,500 depending on the fuel efficiency of the new car.

Other critics worry the program will have a negative impact on charities that receive money from donated vehicles.

There also may be some disappointed consumers. Sam Weaver, a vice president with Chevy Chase Acura Nissan in Bethesda, says some consumers early on thought they got the cash incentive on top of the trade-in value of the car. Trade-ins are scrapped and can't be resold.

Also, the program isn't suited for those whose old vehicle is worth more than the cash incentive.

Still, some consumers say they will buy a new vehicle as soon as they can before the federal money runs out.

Billy Hix of Oklahoma is one of them. He usually buys used cars and drives them until they're ready for the scrap heap. "We're pretty frugal," he says.

Today, he plans to exchange his 1995 Rodeo with 160,000 miles on it - worth about $750 - for a new 2009 Toyota Highlander. His old beater qualifies for a $4,500 incentive, reducing his new vehicle's price to $22,300.

About the 'Cash for Clunker' program

* Your vehicle must be less than 25 years old on the trade-in date

* Only purchases or leases of new vehicles qualify

* Generally, trade-in vehicles must get 18 miles per gallon or less (some very large pickup trucks and cargo vans have different requirements)

* Trade-in vehicles must have been registered and insured continuously for the full year preceding the trade-in

* Find more details at www.cars.gov

Source: National Highway Traffic Safety Administration

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