Dealers hope ‘cash for clunkers’ will goose new-car sales
Through a program automakers and dealers hope will stimulate new-vehicle sales, car shoppers soon could get government incentives to swap their old vehicle for a new fuel-efficient one.
President Barack Obama is expected to sign the "cash for clunkers" program, approved by the Senate on Thursday, into law soon. That means owners of older models like a 1994 Toyota Camry, 1999 Chevrolet Tahoe or 2002 Chrysler Town and Country could receive up to $4,500 to scrap their vehicles and buy new ones.
"I’ve been sitting on the fence for about a year," said Jim Seegraves, 44, of East Lansing, Mich., who has been looking to replace his 2000 GMC Sierra pickup. "This legislation will help me get over the hump and get the car that I want."
Dealers, including those in the St. Louis area, say it will be a valuable tool to lure more shoppers to their showrooms. Every bit helps, said James Heutel, co-owner of Sunset Ford in south St. Louis.
Fuel economy on several Ford vehicles, such as the Focus and Fusion, would qualify for the rebates and attract new-car shoppers, Heutel said. Although "cash for clunkers" details still are being finalized, he believes St. Louis dealers will see a boost once the program starts.
"I think it’ll trickle down," he added. "I’m hoping to get sales out of it."
But while the program shows promise, one industry observer said it is a "drop in the bucket" for the struggling auto market.
The "cash for clunkers" bill provides $1 billion to run the program from July through November, funding that could generate as many as 250,000 new-vehicle sales.
That’s a minor sales amount, said Jeremy Anwyl, chief executive of auto information website Edmunds paydayloans.com. By comparison, the industry expects to sell less than 10 million vehicles in the U.S. in 2009, down from more than 16 million in 2007.
"This is not going to help the car industry in any material way," Anwyl said.
The program is aimed at replacing older vehicles — those built in model year 1984 or later — that get 18 mpg or less. An owner will trade in a vehicle and, instead of receiving the trade-in value from the dealer, he or she can apply a $3,500 or $4,500 rebate toward a more fuel-efficient vehicle.
Trade-ins have to be owned for at least a year, and the new vehicle must have a manufacturer’s sales price of less than $45,000. The rebate amount depends on the mileage improvement from the old vehicle.
The offer would make sense for vehicles with trade-in values less than $4,500.
A 1998 Jeep Cherokee 4-wheel-drive with about 150,000 miles, for example, might only get $1,000 to $1,500 as a trade-in vehicle, according to estimates by Kelley Blue Book. Since the 1998 Cherokee gets about 17 mpg, an owner could parlay it into a new Ford Escape Hybrid — 2009 versions get 28-to-32 mpg — and maximize the trade-in to $4,500.
Anwyl said most vehicles are worth more, and many owners of those qualifying vehicles either do not want an increased car payment or cannot afford one.
The government is expected to implement the "cash for clunkers" incentives by early August.
Angela Tablac of the Post-Dispatch contributed to this report
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