The day the 100-plus pages of rules for the “Cash for Clunkers” program were made available to dealers, Rick Evans, owner of Huntington Beach Chrysler Jeep, grabbed a big cup of coffee and started reading.
The federal program, officially known as Car Allowance Rebate System, gives auto buyers a $3,500 to $4,500 rebate for trading in their older model autos for a new auto with better gas mileage. While President Obama announced last week that the program is short on money due to its popularity, some legislators are hoping to add $2 billion more to it.
It is designed to stimulate the auto industry, which has been hard hit by consumers pulling back on their spending. The program was modeled after a European program that gave auto dealers a 30% lift.
The rules were a lot to read, but worth it, Evans said.
“It’s really a win win,” he said.
On the first day the program, July 23, Huntington Beach Chrysler Jeep made a couple of sales through Cash for Clunkers.
It seems like Evans was not the only one who sat down to read the new rules.
The people who came to the dealership to trade in their cars were already familiar with the program, he said. They had done their research.
But there will be auto buyers who walk into the dealership who won’t know anything about the program, so Evans assigned two managers to be “car czars,” experts in the Cash for Clunkers program. Since the dealers are reimbursed by the government for the rebates, they are as amped to push the program as some buyers are to capitalize on it.
But there are a lot of rules.
If a dealer accepts a clunker, it must dispose of the engine so it won’t be put back on the road and the rest of the auto must be sent to a certified dismantler.
The customer has to have owned the auto for at least a year and provide proof of insurance (to avoid people buying autos from junk yards to “flip”). The auto needs to be less than 25 years old and get fewer than 18 miles to the gallon.
The buyer has to replace it with a new auto that gets 22 miles to the gallon or more.
Some dealerships are making the deal even sweeter.
Chrysler Group LLC is offering a match to the Cash for Clunkers program. Altogether, customers could get up to $9,000 off a new auto.
Other automakers, including Torrance-based Toyota Motor Sales USA Inc., have also begun advertising campaigns, making customers aware of the Cash for Clunkers program, and some, such as Fountain Valley-based Hyundai Motor America, started selling new autos under the program earlier than July 23.
The Orange County Automobile Dealers Association, based in Costa Mesa, had urged dealers to wait until the rules were finalized. The program ends Nov. 1 or whenever the money runs out.
Worst is Over
The Orange County Automobile Dealers Association’s recent forecast starts out with humor: “There are many words that can be used to describe the economic downturn that has ravaged the auto industry. And most of them are not suitable for print!”
But the report goes on to say the worst is over and gradual improvement lies ahead.
This year new auto registrations,a barometer of sales,are forecast to fall about 50% to 90,000 autos in OC; in the U.S., auto dealers are projected to sell 10 million autos.
The report says pent-up demand will eventually lead to normal sales. It downplays the Cash for Clunkers program, saying it will have little impact because of the miles per gallon restrictions on eligible trade-ins.
For the first half of the year through June, OC and Los Angeles County were off more than the U.S. market was. OC was down 39.4% to 42,948, LA was down 42% to 107,272 and the U.S. declined 35% to 4,810,987.
In June, auto registrations were down 51% to 5,621 in OC. Of the luxury dealers, Lexus was hammered, down 69% to 167 autos in June. Mercedes-Benz was down 44% to 374 autos and BMW was down 31% to 331 autos.
Charitable Endeavors
Racing parts store OC Motorsports, based in Costa Mesa, held its grand opening recently, donating $5,000 to the Lusk Legacy Foundation, a charity that works to improve the safety of freestyle motocross.
OC Motorsports is an offshoot of Orange Coast Chrysler Jeep Dodge in Costa Mesa.
Owners Brandon Piorek, Dan Fresh and Jon Gray opened the store near Gray’s dealership on Harbor Boulevard.
Audi and Infiniti of Mission Viejo helped raise $300,000 for Mission Hospital.
About 100 sponsors took part in the annual golf event at the Coto de Caza Golf & Racquet Club. At the end of the evening the Audi and Infiniti of Mission Viejo owner, Matt Gunderson, gave away an auto.
