CARS program strains inventory at dealerships

Talk about it

WORTHINGTON — When the National Highway Traffic Safety Administration (NHTSA) finalized the ruling on July 24 that put the Car Allowance Rebate System (CARS) into effect, dealerships were already getting inquiries about the program commonly known as “Cash for Clunkers.”

President Barack Obama signed CARS into law in June, earmarking $1 billion toward a program designed to increase sales for the nation’s troubled auto industry and get consumers out of their gas-guzzling clunkers and into fuel-efficient transportation. The official start date of the program was Friday. As of Wednesday morning, the www.cars.gov Web site estimated $142 million in rebates had already been credited to customers.

Local dealerships expressed enthusiasm for the program, but seem to have one concern in common — are there enough vehicles to go around?

“We’ve had our concerns,” said Heather Weston, owner of Kruse Motors and K&S Motors, both of Worthington. “Between our normal summer sales and already transitioning to a new model year — this comes right in the middle of that. Our inventory is down right now.”

Weston said she has plenty of vehicles on order, and with the rebate program running through Nov. 1 or until the rebate money runs out, she hopes the new autos will be available by then.

“It might just cycle itself out fine,” she stated. “As long as people are patient waiting for them to come in.”

Jordan Papik, general sales manager at Papik Motors in Luverne, said the lack of available new vehicles is a huge problem.

“We’ve sold vehicles to customers in Aberdeen and Fargo,” he said. “People are calling from all over just to find the vehicles they are looking for.”

The summer sales and new model year aren’t the only setbacks dealerships are facing. Weston said General Motors (GM) is already into its summer shut down.

“Inventory is light with GM coming out of bankruptcy,” Papik said. “Now with the new incentive in place, we’ve had a lot of inquiries, but it is just tough to find vehicles for them.”

The Cash for Clunkers program allows customers to turn in vehicles that get fewer than 18 miles to the gallon and earn a credit toward a new purchased or leased vehicle that is more fuel efficient. If the new auto gets 4 to 10 miles per gallon (mpg) more than the trade-in, the rebate to the customer will be $3,500. If it’s more than 10 mpg, the rebate is $4,500.

“We’ve already done a couple,” Weston said. “There has been a lot of interest.”

“It is a great program,” Papik stated. “We’ve really had a lot of interest, and sales have really picked up since it was introduced.”

Most of the rebates being handed out at Kruse and K&S, Weston said, are for $3.500.

“We’re not seeing a lot qualify for $4,500,” she added.

In Luverne, Papik Motors is selling a lot of minivans, Papik said.

“They are eligible,” he explained. “There has been some interest in pickups, which are also eligible. The majority of our inventory is available.”

When the program was first discussed, the thinking was it would be all about small fuel-efficient cars, Papik said.

“But you can trade in an old vehicle that gets less fuel economy for a new similar one that gets better,” he stated. “One customer drove a 1999 pickup and purchased a new pickup.”

The fuel economy increase was enough to qualify because newer models get better mileage, he added.

Many dealerships have been fielding questions about the program.

“Our most frequent question is what vehicles qualify,” Weston said. “The biggest thing is they have to be drivable, but that doesn’t mean mechanically sound. This is not a push, pull or drag promotion, though. You can’t just go buy a clunker and trade it in.”

A trade-in vehicle, besides getting less than 18 mpg, must also be less than 25 years old and have been in the owner’s possession for at least a year. It must have been continually insured and registered to the owner for that year, and there can be no liens on the title.

At www.cars.org, there is a list of frequently asked questions for anyone considering the program, and there is also a spot where prospective new car buyers can find out what kind of gas mileage their clunker is getting on the average.

“There is a nice little comparison feature on the site that allows you to put your vehicle in and see what you qualify for,” Weston said.

Also on the site is a listing by city and state of which dealerships have registered for the program, but according to NHTSA spokesperson Karen Aldana, all of the registered dealerships are not on the list. Because the program began Friday and applications continue to be processed, data entry is not quite up to date.

Both Weston and Papik said getting registered was an all day process.

“It began Friday morning, and the Web site crashed promptly at 6:05 a.m. when I was trying to enter the information,” Weston said. “I spent all day trying to get it done.”

“I spent 10 hours trying to register,” Papik said. “I did it over and over again.”

Papik Motors is listed on the Web site, but as of Wednesday afternoon, Kruse and K&S were not.

“But we are registered and approved,” Weston stated.

According to its own Web site, Kemna Asa Auto Plaza in Jackson is participating in the program. Scholtes Auto World of Worthington has also reportedly registered.

So where do all the clunkers go?

After accepting a trade-in, the dealership has to document turning the vehicle over to a salvage yard. The dealership is allowed to keep $50 of the salvage cost to cover administrative fees, and the rest of the money is given to the owner.

“We’re not talking about a lot of money,” Weston said. “On average these cars are from 1999 or older, and they bring in on average about $100.”

After $50 of that is paid to the dealership, there is just enough left for a nice dinner to celebrate buying a new automobile.

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