By Brendan Moore

07.28.2009

The NADA (National Automobile Dealers Association) stated yesterday that over 16,000 dealers in the US have signed up to participate in the federal government’s “cash-for-clunkers” program and that public interest in the program seems to be much higher than forecast.

Since there were approximately 19,000 new-vehicle dealers in the US at the end of June, that means that around 80% of all dealers have signed up for the program.

Under the federal program, people that trade in eligible older trucks or cars when they buy a new, more fuel-efficient vehicle can receive as much as $4500 USD in credits.

The law took effect on July 1, but since the U.S. didn’t publish rules for the program until July 24, it was difficult to gauge just how much interest there was in the program. But in the last four days since the rules of the program were defined, it has become obvious that the program is a bona fide hit. Some dealerships wrote up deals weeks in advance and had the eligible trade-ins from customers sitting on their back lots, waiting for the rules to be published so that they could pull the trigger on the deal itself.

It looks as if some dealerships will have post some great sales numbers in July and August, at the very least.

And, within that statement is the potential problem, because the program expires on November 1, 2009, or, when the 1 billion dollars in federal funding runs out – whichever comes first. If initial demand holds up, then the money is going to run out way before November 1, reducing the last couple of months of the program to serve as a sad dénouement.

The two main reasons that the program exists in the first place is to spur new vehicle sales, and, as a secondary consequence of those sales, replace some gas guzzlers on the road now with more fuel-efficient vehicles that use less gasoline and put out less emissions.

Will the government put some more money towards their economic and environmental goals?

It’s always hard to predict what will happen in politics, but there are already some murmurings from Democratic politicians suggesting that the program should be extended vis-à-vis the timeline, and enhanced with more monetary funding, should demand for the program outstrip supply early on.

Meanwhile, these next couple of months will be a bright spot in an otherwise cloudy year for a lot of dealerships. On the consumer side, it is a pretty sweet deal if your trade-in meets the eligibility requirements – you can’t beat it with a stick. It provides a tremendous incentive to buy a new car for a great, out-the-door price.

As a courtesy to our readers, we will reiterate the program terms below:

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The bill provides cash vouchers of up to $4500 USD for car buyers that trade in vehicles defined as gas-guzzlers. The eligible trade-in vehicles are:

Passenger cars as old as 1984 model year with combined mpg ratings of 18 or less are eligible. Owners get a $3,500 voucher if they buy for a new car that is rated by the federal government at least 4 mpg higher, or, $4,500 if they buy a car that achieves at least 10 mpg more.

SUVs, pickups or minivans as old as 1984 model year that get 18 mpg or less could redeem a voucher for $3,500 if their new SUV, truck or minivan gets at least 2 mpg more than their old vehicle or $4,500 if the new truck or SUV gets at least 5 mpg more. No word yet on what happens when someone trades an old pickup truck for a new car, but since the light truck is a passenger vehicle, it is assumed the passenger car terms of the program kick in.

Owners who wish to trade in such a vehicle must have owned it for at least a year, and it has to be road-worthy. Dealers are then accountable for making sure the trade-in gets taken off the road and junked.
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Lastly, just as an FYI, for those consumers interested in redeeming a trade-in under the program terms, you may wish to do that sooner rather than later, just in case the program is not extended and/or replenished.

Editor’s Note: A federal government spokesman said late this afternoon (07/28/09) that over 20,500 dealers have now applied for eligibility for the cash-forclunkers programs. We assume the difference in numbers between the amount of dealers the NADA lists and the government application count is due to the fact the government requires an application for each make the dealership has in one location. Therefore, as an example, a Buick-GMC dealer might be on the same lot, but would be required to submit two separate applications to the program.

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