Tony
01-01-2010, 08:14 AM
I predicted this as soon as the program started and not too many people beleived me. Of course it affects us, and has from the start. Jsut remember how many auction cars you were moving last year compared to this year and you'll see it.
"I was just looking for something small for my 16-year-old daughter to start driving — something in the $4,000 or $5,000 range. But I couldn't find anything," Elgin business owner Pat Smith said. The first auto dealer he approached "had a huge old conversion van, and a Dodge Durango truck with 100,000 miles. I did a lot of Internet searching, too.
"After a couple months, I finally found a car. But it wasn't really what I was looking for. It was settling for what I could find," Smith said.
"A lot of people are looking for vehicles in the $10,000 price range and there aren't many out there," said Rachel Clark, a saleswoman at Feeny Chrysler-Jeep-Dodge in Elgin. "Any time we get in a decent trade-in worth about $10,000, it sells almost immediately."
John Fenzel, owner of Fenzel Motor Sales in Hampshire, said, "A 2006 minivan, if you can find one, will probably cost you $600 or $700 more than a year ago."
Welcome to the world of used cars, post-Cash for Clunkers. Because 690,000 used cars were destroyed last summer under that government stimulus program, just when many drivers stung by the recession no longer can afford to buy a new car, there is a lingering shortage of good used cars. And good used cars that are available are likely to be more expensive than half a year ago.
'Shooting your dog'
Officially known as CARS (the Car Allowance Rebate System), the stimulus plan was usually referred to as "Cash for Clunkers." The object was to jump-start the production of new cars and also decrease the amount of gasoline being used by vehicles on the road. If someone would trade in an older, lower-gas-mileage vehicle to buy a new, higher-gas-mileage vehicle, Uncle Sam would reimburse the buyer with a $3,500 or $4,500 rebate.
The project aimed to spend $1 billion to sell 250,000 cars over three months. It actually spent $3 billion to sell 690,000 cars in less than one month. But that meant almost 700,000 used vehicles, some of them in good shape, were taken out of circulation. And the used-car business is still feeling the effects.
"A lot of good cars disappeared," Fenzel said. "The way we had to destroy some of the trade-ins was almost a sin."
Fenzel recalled how the Cash for Clunkers rules required a dealer to take the trade-in and destroy its engine by draining its oil, replacing that with a silicate solution and running the engine until the silicates caused the internal moving parts to weld together.
The process was "like shooting your pet dog," Fenzel said. He especially mourns for one 2001 Jeep Cherokee.
"It had new tires, a good body, no rust," Fenzel said. "It was a sin to destroy that Jeep. The customer was in a frenzy to get that $4,500 rebate. But to be honest, we could have sold that to somebody else for $6,000."
The condemned Cherokee even fought for life, Fenzel recalls. After the engine stalled the first tine, a mechanic cranked its starter again and the engine started again. Putting in a second dose of poison and running the Jeep until the engine died felt "like administering a coup de grace shot to the head of a man you had just executed by firing squad," Fenzel said.
Factory delays
"Some of the trade-ins looked like clunkers. But others were in good condition," Steve Grady, sales manager at Feeny, agreed. "That removed from circulation a lot of the kind of used vehicles that in Elgin you sell quite a few of — the low-priced but workable models."
Fenzel, who also is a Chrysler dealer, and Grady said they didn't benefit much from Cash for Clunkers because while it was going on, Chrysler had shut down some plants and was barely shipping new cars to its dealers — at least not the kind of high-gas-mileage cars needed to qualify for Cash for Clunkers. Feeny's usual inventory of about 200 new vehicles fell to just 20 or so by September. Across the street, meanwhile, high-gas-mileage Japanese and Korean cars seemed to be selling like mad.
With new vehicles temporarily unavailable from the plant, and what few trade-ins there were being gobbled up by Cash for Clunkers, it got to the point where Feeny was paying its salespeople a bonus if they could persuade a customer to sell a used vehicle to the dealership for cash. A mass mailing went out to Feeny customers, urging them to bring in their 2002-2007 vehicles and sell them to the dealership.
Signs of hope
Meanwhile, in this era of unemployment, demand for an affordable car kept rising, and that often meant a used one. "Two years ago, our sales would be maybe 70 percent new, 30 percent used," Grady said. "Now it's more like 50-50."
As the factories have resumed shipping new cars, and as about half of new-car sales bring in a trade-in, and as Cash for Clunkers recedes into history, used cars are gradually starting to become more available, and their prices have begun to stabilize or even fall, dealers agree.
"We just got five trade-ins in a week," Fenzel said. "It has seemed like old times again in the last few days."
"It's been an interesting market, to say the least," Clark said.
"I was just looking for something small for my 16-year-old daughter to start driving — something in the $4,000 or $5,000 range. But I couldn't find anything," Elgin business owner Pat Smith said. The first auto dealer he approached "had a huge old conversion van, and a Dodge Durango truck with 100,000 miles. I did a lot of Internet searching, too.
"After a couple months, I finally found a car. But it wasn't really what I was looking for. It was settling for what I could find," Smith said.
"A lot of people are looking for vehicles in the $10,000 price range and there aren't many out there," said Rachel Clark, a saleswoman at Feeny Chrysler-Jeep-Dodge in Elgin. "Any time we get in a decent trade-in worth about $10,000, it sells almost immediately."
John Fenzel, owner of Fenzel Motor Sales in Hampshire, said, "A 2006 minivan, if you can find one, will probably cost you $600 or $700 more than a year ago."
Welcome to the world of used cars, post-Cash for Clunkers. Because 690,000 used cars were destroyed last summer under that government stimulus program, just when many drivers stung by the recession no longer can afford to buy a new car, there is a lingering shortage of good used cars. And good used cars that are available are likely to be more expensive than half a year ago.
'Shooting your dog'
Officially known as CARS (the Car Allowance Rebate System), the stimulus plan was usually referred to as "Cash for Clunkers." The object was to jump-start the production of new cars and also decrease the amount of gasoline being used by vehicles on the road. If someone would trade in an older, lower-gas-mileage vehicle to buy a new, higher-gas-mileage vehicle, Uncle Sam would reimburse the buyer with a $3,500 or $4,500 rebate.
The project aimed to spend $1 billion to sell 250,000 cars over three months. It actually spent $3 billion to sell 690,000 cars in less than one month. But that meant almost 700,000 used vehicles, some of them in good shape, were taken out of circulation. And the used-car business is still feeling the effects.
"A lot of good cars disappeared," Fenzel said. "The way we had to destroy some of the trade-ins was almost a sin."
Fenzel recalled how the Cash for Clunkers rules required a dealer to take the trade-in and destroy its engine by draining its oil, replacing that with a silicate solution and running the engine until the silicates caused the internal moving parts to weld together.
The process was "like shooting your pet dog," Fenzel said. He especially mourns for one 2001 Jeep Cherokee.
"It had new tires, a good body, no rust," Fenzel said. "It was a sin to destroy that Jeep. The customer was in a frenzy to get that $4,500 rebate. But to be honest, we could have sold that to somebody else for $6,000."
The condemned Cherokee even fought for life, Fenzel recalls. After the engine stalled the first tine, a mechanic cranked its starter again and the engine started again. Putting in a second dose of poison and running the Jeep until the engine died felt "like administering a coup de grace shot to the head of a man you had just executed by firing squad," Fenzel said.
Factory delays
"Some of the trade-ins looked like clunkers. But others were in good condition," Steve Grady, sales manager at Feeny, agreed. "That removed from circulation a lot of the kind of used vehicles that in Elgin you sell quite a few of — the low-priced but workable models."
Fenzel, who also is a Chrysler dealer, and Grady said they didn't benefit much from Cash for Clunkers because while it was going on, Chrysler had shut down some plants and was barely shipping new cars to its dealers — at least not the kind of high-gas-mileage cars needed to qualify for Cash for Clunkers. Feeny's usual inventory of about 200 new vehicles fell to just 20 or so by September. Across the street, meanwhile, high-gas-mileage Japanese and Korean cars seemed to be selling like mad.
With new vehicles temporarily unavailable from the plant, and what few trade-ins there were being gobbled up by Cash for Clunkers, it got to the point where Feeny was paying its salespeople a bonus if they could persuade a customer to sell a used vehicle to the dealership for cash. A mass mailing went out to Feeny customers, urging them to bring in their 2002-2007 vehicles and sell them to the dealership.
Signs of hope
Meanwhile, in this era of unemployment, demand for an affordable car kept rising, and that often meant a used one. "Two years ago, our sales would be maybe 70 percent new, 30 percent used," Grady said. "Now it's more like 50-50."
As the factories have resumed shipping new cars, and as about half of new-car sales bring in a trade-in, and as Cash for Clunkers recedes into history, used cars are gradually starting to become more available, and their prices have begun to stabilize or even fall, dealers agree.
"We just got five trade-ins in a week," Fenzel said. "It has seemed like old times again in the last few days."
"It's been an interesting market, to say the least," Clark said.