Federal program aims to spur new car sales

BY BILL O'BRIEN
bobrien@record-eagle.com


TRAVERSE CITY -- Susanelou Adair figured she'd drive her aging sport utility vehicle until its last gasp.

But the idea of getting thousands of federal dollars toward a new car changed all that. The Lake Ann woman soon will be tooling around in shiny new Hyundai Sonata; she's among dozens of area residents taking advantage of the federal government's Car Allowance Rebate Systems program.

"We have a 1996 Chevy Blazer that I love dearly, and it's in mint condition, but it's a gas hog." Adair said. "We probably would've fixed her up and kept her running until she died."

Federal lawmakers approved CARS, also known as "Cash for Clunkers," this summer with a dual goal of spurring new car sales and getting older, less fuel-efficient vehicles off the road. Consumers can get up to $4,500 toward a new car purchase if they trade in an older vehicle with a combined average mileage of 18 miles per gallon or less. Trade-ins can't be re-sold and will be turned over for scrap.

Adair and her husband did some math and figured gas savings from her 30-mpg-plus new car and the government's financial incentives were too good to pass up.

"My husband said, 'Now's the time'," Adair said.

Area car dealers, who haven't had much to cheer about while enduring dreadful new car sales this year, are pleased with local response to the federal trade-in incentive, which they said is spurring consumer interest.

"We're excited. It's getting us some customers we've never had before," said Bill Marsh Jr. of the Marsh Automotive Group in Traverse City. "The prospect of getting five to 10 times of what a (trade-in) vehicle is worth is causing some people to take a look."

Marsh said his dealership had at least 16 vehicles pre-sold as of late last week through the CARS program. One such buyer is Russ Priest, who's trading in his boxy, 1990 Ford Bronco II for a new Elantra made by Hyundai.

Priest, who lives on an old Christmas tree farm in Long Lake Township, needed another vehicle, since his teenage daughter is about to get her driver's license. He considered buying a used car when he heard about the Cash for Clunkers proposal, then followed the bill's progress on the Internet.

"I was really on the fence," said Priest, who doesn't drive his Bronco much, but said it needs $1,200 in repairs to keep rolling.

"And that's until the next thing goes wrong with it," he said.

Factory incentives and the federal program will his new car cost by about $6,000, he said.

"It was ideal to turn the Bronco in right now," Priest said. "I could get something newer for a better price."

Other dealers said inquiries about CARS increased as its implementation neared.

"Our buzz started a couple of weeks ago," said Dan McCormick Jr. of Dan McCormick Ford-Chrysler-Plymouth-Dodge in Kalkaska. The dealership has at least eight pre-sales through the program.

McCormick said consumer interest seems to be hit-and-miss around the state, as he's talked to other Michigan car dealers who said incentives aren't generating much activity.

"It seemed to have quite a resurgence here," he said.

Dealers see some drawbacks to the program. McCormick said there's a strong market for some of the vehicles being traded, vehicles that fit some potential buyers' budgets in these tough economic times. They're looking for cheap transportation, he said, but CARS mandates the trade-ins be taken off the road.

"We'll take cheap used cars out of the market," he said.

Marsh said timing is another problem for some dealers, who are short on some vehicle inventories due to factory shutdowns that were part of bankruptcy proceedings at Chrysler and General Motors.

"I'd rather see this a little bit later," said Marsh, who won't get new car deliveries from Chrysler until late this summer, even as the company launched a new incentive last week that could double the federal government's $4,500 credit.

Nationally company officials at Hyundai, which specializes in fuel-efficient cars, estimated the CARS incentive is driving about 10 percent of its new car sales.

A company survey from late May indicated that 38 percent of potential car buyers were familiar with CARS, and 11 percent were putting off their new vehicle purchases until the incentive became available.

The federal program continues until Nov. 1 or until its $1 billion appropriation runs out. Dealers estimate it will cover around a quarter-million vehicle purchases around the country.

CARS details

The federal governments Car Allowance Rebate Systems (CARS) started Friday and offers up to $4,500 toward purchase of a new vehicle for trading in an older vehicle.

Details include:

-- Vehicles must be 25 years old or less on the trade-in date

-- Only new vehicle purchases qualify for the incentive

-- Trade-in vehicles generally must get 18 mpg or less and new vehicles must meet certain fuel economy requirements

-- Trade-in vehicles must be registered and insured continuously for a full year prior to purchase

-- The program ends Nov. 1 or when the $1 billion in federal funds allocated for CARS runs out

More information is available at www.cars.gov or by calling a U.S. Department of Transportation hotline at 1-866-CAR-7891.