Popularity of 'Cash for Clunkers' leads to rapid depletion of inventory

Monday, August 3, 2009
Car dealers from El Dorado Springs to Ft. Scott agree that the $1 billion "Cash for Clunkers" program is proving to be a success for their business. (Rusty Murry/Nevada Daily Mail)

The "Cash for Clunkers" program ran out of gas after just a week on the road. It was, however, a good few days for area automobile dealers. Three area dealers have all had a run on their inventories that has left them almost without any vehicles to sell.

The government sponsored program "has dramatically improved traffic" at the Shepherd Team Auto Plaza, 1819 S. Main, as well.

"It's brought a lot of people out that probably wouldn't have bought a car right now," said Robert Tersinar, general manager at the Fort Scott dealership. "It's been a real shot in the arm for our dealership."

The Nevada Auto Mall has had "a spike on the amount of customers coming in on the showroom floor," according to general manager Dan Hope Jr. Hope said they have had a lot of fun during the event. He has had calls from as far away as Indianapolis, Ind. concerning a specific model of Jeep that he has on his lot. Hope also said that just about every vehicle on his lot that qualifies for the program is "spoken for."

Tersinar expressed a concern about the money running out, and indeed, that seems to be the case for now.

Many of the same sentiments were echoed by Harold Fugate, owner of Fugate Motors in El Dorado Springs, Mo. He characterized the activity at his dealership as "brisk," saying that there has been some momentum from this which led them begin trading for high mileage cars, more than 150,00 miles, as much as six weeks ago.

The lot at Fugate Motors is almost empty of cars that qualify for the Cash for Clunkers discounts. All that are left are some heavy-duty trucks, according to Fugate. He anticipated the short life of the program saying, "I predicted right from the get-go it would be over as soon as it started."

Fugate and Tersinar both commented on the complexity of the program. Fugate labeled the paperwork as "unreal" saying "we haven't collected for one yet." The computer system is overwhelmed and tends to crash. Tersinar used the term "administrative nightmare" in describing how the whole system is "a very sophisticated and complicated program."

All of the dealers agree that, for a while, their inventory will be depleted. Even the infusion of $2 billion more into the program will not help that. There just aren't any cars out there on the lots.

And consumers can not go in and buy one of the traded-in vehicles. As part of the program, dealers are required by law to drain the oil and replace it with a sodium silicate solution. They then start the engine with the solution, basically a combination of salt and sand, and run the engine until it locks up.

The rest of the car then has to be labeled for destruction and goes to a specially-approved scrap yard after all of the paperwork is completed. Some dealers are having trouble getting rid of the clunkers because of the low scrap value and the fact that there is nothing to salvage. The dealers and some of their employees think that the infusion of more money should wait, at least until they have a chance to re-stock.

Denny Basore, a salesman and employee of 20 years at Fugate Motors said, "What they need to do is wait about 90 days."

If the program were delayed for that length of time, it would give dealers time to recover from the quick depletion of their inventories. It would also give auto manufacturers time to resume or step up production and shipment of new cars. It would also give analysts time to take a close look at and perhaps overhaul the system. Last but not least, it might give consumers time to decide if they want to take advantage of this opportunity.