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C4C Tumbles Onto ‘Main Street’

August 4, 2009

Man, talk about a whirlwind of a launch. I’m not sure anyone could have expected the type of response the Cash for Clunkers program received. Check out these stats.

Number of Dealer Registration Submitted (as of 4 p.m. Monday): 24,238

Number of Approved Dealers: 20,495

Number of Dealer Transactions Submitted (as of 4 p.m. Monday): 157,000

Dollars Submitted: $664 million

Top 10 New Vehicles (as of 9:30 a.m. this morning):

1. Ford Focus FWD

2. Toyota Corolla

3. Honda Civic

4. Toyota Prius

5. Toyota Camry

6. Ford Escape FWD

7. Hyundai Elantra

8. Dodge Caliber

9. Honda Fit

10. Chevrolet Cobalt

Top 10 Trade-in Vehicles (as of 9:30 a.m this morning)

1. Ford Explorer 4WD

2. Ford F150 Pickup 2WD

3. Jeep Grand Cherokee 4WD

4. Jeep Cherokee 4WD

5. Dodge Caravan/Grand Caravan 2WD

6. Chevrolet Blazer 4WD

7. Ford Explorer 2WD

8. Ford F150 Pickup 4WD

9. Chevrolet C1500 Pickup 2WD

10. Ford Windstar FWD Van

Yesterday, White House Press Secretary Robert Gibbs said initial analysis of a group of applications showed that transactions were generating a 61 percent increase in fuel economy, and that vehicle purchases under the program touted 25.4 miles per gallon. Average fuel for vehicles traded in: 15.8 miles per gallon. “In gas alone, that’s going to save a typical customer $700 to $1,000,” he said.

“It’s good for consumers. It’s good for dealer and auto manufacturers,” he added.

And hey, Ford reported its first sales increase in two years (1.6 percent).

Listen, I know many of you question how things played out, but you have to admit that this might be the first stimulus to actually reach “Main Street.”

And yes, this wasn’t the smoothest rollout of a government program. But for a program of this magnitude, I’m not sure what anyone could have expected , especially under the timeframe.

Even officials from the National Automobile Dealers Association expected it would take a few weeks to work out the bugs. But imagine this, not three days after the NADA staged a Webinar to educate dealers on how the process worked did the NHTSA start talking about suspending the $1 billion program. Even more surprising, the brief suspension of the program happened just six days after the NHTSA released the finalized rules.

But then again, with 8.8 million visits to the cars.gov site between June 22 (two days prior to President Obama signing the legislation into law) and Aug. 2, I’m not sure what anyone expected.

Heck, I was talking to a college friend on Facebook last Thursday, three days after the NADA’s Webinar. She was hoping to trade in the 1993 Jeep Cherokee she drove around in college. Unfortunately, we were only four minutes into our Facebook conversation when I received a Google alert that the program was about to be suspended.

It’s unfortunate the amount of uncertainty surrounding the program, and the possibility of dealers having to unwind deals if the program is suspended before they can process the Cash for Clunkers paperwork.

That’s why I wonder if it might have been better to release the program, or approve dealer registrations after the NADA’s July 27 Webinar. As I mentioned before, I don’t see how you can expect things to go flawlessly for a program of this size. Add to that the fact that some dealers and manufacturers were already processing deals before NHTSA released its finalized guidelines. Seriously, what did anyone expect?

I checked in with Mike Warwick, an Internet director at Stoneham Ford in Massachusetts . Warwick< and his Cash for Clunker’s team were the focus of the magazine’s August cover story. He said it took three days for his dealership to get registered for Cash for Clunkers. He added that the biggest issue was the instructions for entering deals. “Most of the frustration could have been averted by having a 30-minute Webinar that explained how you submit a transaction,” he said. “I hope the Senate approves the extra $2 billion and keeps the program going.”

See, for all the complaints out there – and there are many – this program did what no incentive could do thus far – get skittish consumers in the buying mood. Warwick’s dealership, for instance, hoped the program would result in 100 deals for the month – half of which he expected would be used sales for consumers who didn’t qualify for the program. Yesterday morning, Warrick said his dealership had so far processed more than 70 deals under Cash for Clunkers, and that’s less than two weeks after it went live.

And if anything, this program has done the one thing that we’ve needed, and that’s pull those uncertain, but credit-worthy consumers off the fence. Take the friend I mentioned earlier. For starters, I couldn’t believe she was still driving around in that 1993 Cherokee. We beat the heck out of it in college. She told me her father, who purchased the vehicle for her before she went to college, wouldn’t let it go because he prefers to repair than replace. However, she said he changed his stance when he heard about C4C.

And while the brief suspension of the program prevented her from taking advantage of the program, she said her father did eventually let go of the vehicle. However, she said through incentives they saved $7,000 on a new Ford Escape FWD, which, by the way, was the No. 6 vehicle purchased in the NHTSA’s Top 10 list.

“It was crazy,” she said. “The dealership we visited has this old-fashioned bell they ring every time they sell a car. It was 8 p.m. on a Friday and that bell rang a lot.”

Listen, everyone has beaten on this program since it was first talked about back in January. Heck, we ran a story on June 23 that the audience for the program was shrinking because of the 30-day wait for the NHTSA to finalize the guidelines. And now environmentalists are jumping in, saying the program is doing more harm to the environment than good. My gosh, one problem at a time.

Did Cash for Clunkers represent the best execution of a program? No, but we needed some kind of jumpstart. Is it the best use of tax-payer money? I can’t say for sure, but it’s the only thing so far that’s reached “Main Street.”

Comments

  1. 1. David Pilcher [ August 13, 2009 @ 09:47AM ]

    You raise some positive points, however, in the midst of all the excitement about folks responding to a free fist full of our taxpayer money, I fear we fail to fully appreciate the "negative impact areas" of this poor public policy and wasteful use of our tax dollars. Yes, compared to the other "stimulus" (I am being kind here) program enacted earlier this year, cash for clunkers was truly "stimulating". But, I continue to regret the fact that $3,000,000 is cavalierly considered so negligable. I continue to regret that many of these sales would have occured in the next 6 to 12 months without spending taxpayer funds. I continue to regret that this program has a downward impact on some 1 qnd 2 year old used vehicles and at the same time simply moved a late model used purchase to a new vehicle purchase. Those of us in the independent late model used business have lost sales to new vehicles. Many of our 2007 and 2008 used vehicles provide the same boost in fuel economy as a new vehicle. All we did was use our tax dollars to shift the economics of the buying decision to a new vehicle. Honestly, I am glad it has at least helped our New Franchise dealers because they have been slammed from all sides this year, BUT, I regret my governmaent has so blantly discriminated against my business and moved sales away from me using my own tax dollars. I continue to regret seeing the economic value that still resides in these older units simply thrown away and many thinking we have scored a huge victory for the enviornment. Perception has always been stronger than fact.

    So before we all continue to drool and wet ourselves over how wonderful this program is, I encourage all of us to be deeper thinkers and smarter citizens and better stewards of our tax dollars. Look at our own industry, we complain about Washington special interest groups---yet, we are one. Think about it.

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