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When the so-called cash-for-clunkers program was announced a couple of months ago, I was skeptical it would stir much response.
People who drive old cars that get lousy mileage do so because they can’t afford anything better, I figured, and conversations with a smattering of people driving old gas hogs confirmed that. People with junkers can’t afford to buy a new car, even if the government gives them a pile of cash to trade in the old jalopy.
Turns out, I was as wrong as wrong can be.
Reaction to the program, in which the federal government will kick in up to $4,500 if you trade in a vehicle that gets fewer than 18 miles per gallon, has been just short of phenomenal.
“Everyone underestimated the response,” said Dave Montoya, sales manager at Fort Wayne Kia at the 14/69 Automall on Illinois Road.
“It’s crazy. It’s truly unbelievable,” said Craig Ruskaup, sales manager at the O’Daniel dealership on Illinois Road that sells several makes.
People have been pouring into showrooms trying to swing deals partly financed by the government program, and they haven’t been your stereotypical junker owners.
“We’re not running across people who can’t afford to buy a new car,” said Herb Lefler, manager at Fort Wayne Toyota. “They’re cash buyers, people who are frugal who keep their cars for a long time.”
“It’s been completely the opposite” of what they expected, Montoya said. Buyers, he said, “have the money, and they’re paying cash.”
“It’s surprising how many people don’t want to finance,” Ruskaup said.
At Dimension Ford on Illinois Road, a slew of cars was sold through the program, and only two or three buyers financed their purchase. The rest had cash on hand.
Not everyone who shows up expecting a whopper deal gets what they expect. A handful of people find out their cars don’t qualify for the program because they get better mileage than the program allows. A lot of people are on the bubble, Montoya said, with cars that get 19 mpg, just 1 mile per gallon too many.
A handful find out they don’t qualify because in the past year, they’ve let their insurance lapse. To qualify, a car has to have been licensed and insured in the owner’s name for the past 12 months. A handful of people are having to wait to qualify because they have owned their cars for only 11 months or so.
Some people hang their heads and leave when they find out they don’t qualify, but most people are buying anyway, said both Toyota’s Lefler and O’Daniel’s Ruskaup.
Prices have gotten so low, Ruskaup said, it’s stupid. The combination of government vouchers and rebates is letting dealers sell cars for less than $10,000. They’re so cheap that one man, who does a lot of driving and traded in his 14 mpg pickup at Fort Wayne Toyota, estimated he’d save enough on gas to make his car payment.
The program is going so well, dealerships can’t keep up. At O’Daniel, Ruskaup said he sold out of some models in just a couple of days, and he’s scrambling to find more cars, buying them from other dealers around the country.
“It’s great for traffic, but it’s going to devastate our inventory,” said Vic Jones, sales manager at Dimension. “Dealers are going to be scrambling for inventory, especially economy cars.”
The real scramble might be for people wanting to take advantage of the biggest government giveaway ever for car buyers.
The cash-for-clunkers program has $1 billion and is scheduled to run through Nov. 1 or until the money runs out.
A billion dollars sounds like a lot, but spread over the entire country, it’s not that much, Dimension’s Jones said.
Dealers are saying the money could be gone in a month.
That could create a bubble, some fear. What if a car dealer sells someone a car and gives the buyer the $4,500 federal credit, but when the dealer submits the voucher, he finds out the billion dollars is all used up? The dealer is going to want his $4,500, and someone is going to have to pay it.
The lesson to be learned here is twofold. People may say this is the worst economy since the Great Depression, but there’s money out there. And next time you see people in clunkers, don’t necessarily feel sorry for them.
