Transforming Clunkers into Cash
Nick Cutter of Cutter Family Auto Centers and Stan Masamitsu of the Tony Group Autoplex are excited about a new program that makes this a great time to cash in that gas -guzzler for a new ride. To the National Highway Traffic Safety Administration, it’s officially called the Car Allowance Rebate System (CARS). To the general public, it is the Cash for Clunkers program.
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A new federal program makes this a great time to trade in that gas-guzzler for a greener ride
To the National Highway Traffic Safety Administration, it’s officially called the Car Allowance Rebate System (CARS).
To the general public, it is the Cash for Clunkers program.
And to a nation of uneasy auto dealers, their employees and suppliers, it is a hopeful shot in the arm for an industry fighting for its survival.
In the last year, U.S. new auto sales have plummeted. According to motorintelligence.com, passenger car sales are down 35.4 percent from a year ago with truck sales lagging by 34.8 percent. Auto sellers in Hawaii haven’t fared any better.
Sales projections by the Hawaii Automobile Dealers Association (HADA) predict a decline to levels not seen since the end of the 1990s, the “lost decade,” when foreign investment in Hawaii ran dry and auto sales shrank to a little more than 45,000 units. HADA put this year’s sales mark at an estimated 33,000 cars and trucks - less than half the number sold just four years ago.
In an effort to stem the tide of low car sales, the Obama administration, with the help of the Democratic-controlled Congress, has pushed the CARS program as a way to increase sales. The bill’s chief sponsor, Rep. Betty Sutton, DOhio, says on her House Web site, the act “provides consumers a needed incentive to buy a vehicle, while working to reduce greenhouse gas emissions and fuel consumption.”
Sen. Debbie Stabenow, D-Mich., backed a similar version in the Senate, which had the support of automakers and their unions.
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The program is not without its critics. Most of those questioning the plan argue that Cash for Clunkers is too restrictive and that the MPG qualification eliminates too many would-be buyers. Environmentalists argue the plan doesn’t go far enough to reduce the number of pollution-producing vehicles on the road. Supporters of the plan, even admitting the program is far from perfect, say something has to be done to save jobs and to help along the transition to cleaner cars.
Those close to the action, including Hawaii’s 77 dealerships, feel the CARS program will bring more customers to the showrooms even if the buyer does not qualify for a rebate. Once inside, they hope, the customer will discover that their old vehicle no longer makes the grade when it comes to mileage, performance and safety. And while the plan didn’t begin until July 1 and the final rules weren’t released until July 24, shoppers appear interested and ready to buy.
“I am very excited because I think it will bring a lot of people into the marketplace, and we’ve already gotten a lot of inquiries,” says Stan Masamitsu, president of the Tony Group, which represents Honda, Nissan, Volkswagen and Hyundai. “It’s created a lot more conversation about the possibility of getting a new car.”
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While the program is generating a lot of buzz, the idea is nothing new. David Rolf, executive director of the Hawaii Automobile Dealers Association, said Maui Toyota owner Damien Farias proposed the idea two years ago as a way to stimulate sales and increase fuel efficiency. Farias made news in January by donating six vans, worth $142,000, to six nonprofit organizations. Similar plans are under way in several European countries and have been very successful.
New car sales in Germany rose 40 percent after the introduction of a $5 billion plan that offers $3,500 trade-in for a car that is at least nine years old.
The program has even spurred sales of U.S. vehicles in the land where BMW and Volkswagen reign. According to The New York Times, the subsidies have helped triple the sales of GM’s Opel Corsa in Germany, and have led factories in Germany and Spain to return to full production schedules. In France, vehicles involved in the program represent 30 percent to 40 percent of all new car sales.
So far, more than 1 million Germans have signed up for the program, which differs from the American plan in regard to the environmental element. Germany’s program does not include any environmental incentives and places no mileage requirement on the trade-in or for the new car purchased.
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The U.S. plan gives rebates provided the trade-in vehicle is less than 25 years old and the new vehicle gets a minimum combined fuel economy value of 22 miles per gallon for a passenger vehicle, 18 mpg for a Type 1 truck or 15 mpg for a Type 2 truck. Combined fuel economy numbers can be found for all makes and models at http://www.fueleconomy.gov/feg/sbs.htm. The site also lists other tax incentives for new car purchases.
If the new vehicle has a combined fuel economy greater than 4 mpg and less than 10 mpg, the credit is $3,500. The rebate jumps to $4,500 if the combined fuel economy is 10 mpg or higher. The fuel economy standards for trucks, vans and SUVs are different.
To qualify for a trade-in, new Category 1 trucks (SUVs, small and medium trucks and passenger and cargo vans) must have a combined value of at least 18 mpg. Category 2 trucks (a large van or pickup with a wheelbase more than 115 inches for trucks and 124 for vans) at least 15 mpg. Mileage improvement greater than 2 mpg and less than 5 mpg qualifies for a $3,500 rebate. For the $4,500 discount, the mileage must be 5 mpg or higher. Qualifications for Category 3 trucks vary even more.
Confused?
Let the dealers worry about it.
That’s the advice of Nick Cutter, president of Cutter Family Auto Centers.
Cutter says his sales and financing staffs have spent considerable time studying all the ins and outs of the program. What they have
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