- The Washington Times - Sunday, July 19, 2009

Consumers are snapping up cars ahead of the new federal “cash for clunkers” program, reserving popular models before inventories run out, auto dealers around the country say.

The Car Allowance Rebate System, or CARS, won’t begin paying rebates until Friday. The program offers up to $4,500 to car buyers trading in qualified cars and trucks.

Shoppers are already putting down deposits to hold cars until the program kicks in.

“We’ve been reserving cars for customers, taking deposits,” said Vince Sheehy, owner of 17 dealerships and the largest Ford dealer in the Washington area.

“At our Springfield location, we now have 15 deposits so far, and we think that this thing is going to really bust loose starting [this] week,” he said.

Mr. Sheehy sells Fords, Nissans and Subarus in Springfield. He said his other dealerships each have about five cars on hold for customers who put down $500 deposits.

CARS was funded with $1 billion, part of this year’s economic-stimulus package to boost car sales and take older, higher-polluting vehicles off the road.

Analysts cautioned that the program’s impact will likely be limited once the initial burst of enthusiasm wears off, as the rules are restrictive and consumers are still in hunker-down mode.

But dealers around the country say demand is so high that they expect to run out of certain models well in advance of the plan’s Nov. 1 deadline.

“The high-mileage cars are going to be picked over very quickly,” said Mitch Morse, co-owner and general manager of Morse Chevrolet in Kansas City, Kan.

“Our [inventories] are at a level we have not seen in decades; that’s why we’re a little concerned about trying to get people in as quickly as possible,” he said, noting that General Motors stopped producing cars during its bankruptcy.

Mr. Sheehy agreed.

“We’re going to be out of inventory on most of these models by the beginning of October and maybe a little sooner,” he said.

Hyundai dealers, taking advantage of financing from the automaker to give advance rebates to customers, are already delivering cars under the program.

We have already “delivered seven, and have two in the wings,” said Robert Clater, general manager of Easterns Hyundai of Leesburg, Va. Dozens of customers expressed interest in the CARS program last week, he said.

“We see customers that we would normally not see,” he said.

Although the program is drawing shoppers to dealer showrooms, some people are buying even after they find out that they don’t qualify for the rebate.

Barbara Zimmermann, 80, brought her 1995 Ford Taurus to Woltz & Wind Ford in Carnegie, Pa., on Tuesday. The showroom, near Pittsburgh, was jammed at 9:30 a.m. with people asking questions about “cash for clunkers,” she said.

She bought one of the dealer’s last two Ford Focuses - edging out a hesitating Catholic priest - even though she didn’t get a rebate. It was the first car she ever purchased without her husband, who died several years ago.

Mrs. Zimmermann’s Taurus was rated at 19 mpg, higher than the 18 mpg maximum allowed by the program. She insists that her Taurus never got that much mileage, but she loves her new Focus.

“The [gas] needle has not moved, and I’ve been driving it for three days,” she said. “This would not have happened with my Taurus.”

She got $1,000 for her trade-in and a $3,000 cash incentive, reducing her purchase price to about $12,000, she said.

Mrs. Zimmermann needed a new car, having recently damaged the old Taurus in an accident, but she wasn’t in a hurry, she said.

“I went to see what ‘cash for clunkers’ was all about” after reading about it in the newspaper, she said.

But not all dealers are seeing increased activity.

“We’re getting a lot of questions from people about it, but nobody really knows what to do. We don’t really have all the rules yet,” said Tammy Darvish, vice president of Darcars Automotive Group in Silver Spring.

The program’s final rules will not be issued until Friday.

Only vehicles that get 18 mpg or less are eligible. The amount of the rebate, $3,500 or $4,500, depends on how much more fuel-efficient the new car is, compared with the old car. Rules are different for large trucks.

Car buyers do not get any trade-in value for their old cars, which are to be scrapped under the program. Manufacturer incentives and government hybrid-car incentives can be part of the deal, however.

The fuel-efficiency requirements, the lack of trade-in value and hesitant consumers lead some analysts to doubt whether the program will achieve its goals.

“I think that what we’re really looking at is consumers who are already looking for a vehicle and will say, ‘Why not buy a car now?’ and that means not buying a car in 2010 or 2011,” said Rebecca Lindland, an industry analyst with IHS Global Insight.

“We’re not surprised at the high level of interest in the program, but when they really crunch the numbers, the consumer may find it might not be the best deal, or they may not qualify,” she said.

Consumers who have cars with a trade-in value similar in size to the rebate will not benefit from the program, and even those who do will have to make a major financial commitment in a time of job losses and tight credit, she said.

“It’s still going to involve laying out a big chunk of change or taking on debt, and we haven’t seen that consumers are willing to do either one of those things,” Ms. Lindland said.

With funding of $1 billion, the program could provide rebates for about 250,000 cars - and the Obama administration forecasts that nationwide auto sales will be boosted by that amount during the three-month life of CARS.

Ms. Lindland, however, sees “cash for clunkers” adding just 170,000 cars to her industry-sales forecast over the balance of the year, with much of that pulled from next year’s sales forecast.

“We anticipate that the billion dollars is going to last for 12 months, assuming they extend the program,” she said. “They won’t need new funds to extend it,” because there won’t be enough demand.

Mr. Sheehy disagreed, but also saw limited impact on the economy at current funding levels.

“Two hundred and fifty thousand vehicles is a nice start, but that’s not going to get the job done,” he said. “We could do 1 million [vehicles] if the program were funded at $4 billion” as some proponents sought.

Katherine Timpf contributed to this report.

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