Used-car prices rising with Clunker deal

Dealers must disable trade-in engines, which decreases supply of used cars

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— Cash for Clunkers has caused a surge in the amount of cash required to buy a used car, auto dealers said.

Under the federal Car Allowance Rebate System, dubbed Cash for Clunkers, people with older, less-fuel-efficient cars can get a $3,500 to $4,500 rebate when they trade for a new, more efficient car. The program was an instant hit, and Congress added $2 billion to the initial $1 billion allotted for it.

But because dealers must disable the engines of the older cars, the used-car pool is shrinking, Steamboat Springs dealers said.

Used cars are selling at auctions for $2,000 more than their book price, said Jeff Steinke, general manager of Steamboat Motors. That could hurt people who don't have the money to buy costlier cars, said Tom Reuter, who owns Checkpoint Auto Sales.

Steinke said he had picked up few used cars lately because of the price increase.

"Trucks that were $5,000 to $7,000 (less than) book last summer when gas was high are now going for a couple grand over book," Steinke said. "That's a $7,000 to $9,000 swing over a year. It's just odd right now."

Reuter sells used cars at his Steamboat Springs dealership. He said he hasn't seen changes in his business but expects a shift industrywide. About 4,000 to 6,000 cars are sold weekly at Denver auctions, Reuter said. If that number drops because fewer used cars are out there, prices will go up.

That hurts people in need, he said.

"Those who are less advantaged simply have to pay more for old cars," Reuter said.

The government requires the destruction of the cars' engines because the program is partly meant to reduce pollution from car emissions. That benefit would disappear if the older cars that use more gasoline get back on the road.

But Reuter questioned the environmental benefits of Cash for Clunkers. Aging cars eventually die, he said.

"Just by normal attrition, you'll get rid of older cars and those that aren't more fuel-efficient," Reuter said.

Steinke and Scott Cook, owner of Cook Chevrolet and Subaru, said they'd seen increased traffic because of the clunker program. Steinke's dealership sells Ford, Dodge and Jeep vehicles, and Steinke said they'd sold about seven cars through the program.

Cook said his Steamboat and Craig dealerships had delivered six to eight through the program.

"I think it's done what they wanted it to do," Cook said about the program. "I think the dealers at this point are still real nervous about trying to collect the money. We've got a lot of money hanging out."

The government is requiring car dealers to prove that they disabled the vehicles. But dealers can wait until seven days after the sale to destroy the engine in case they don't get approval for the discount, Cook said.

If their sale is rejected, dealers could wind up having given a $4,500 price cut in return for a car worth a few hundred bucks, he said.

Another side effect of the program is that dealers are having a tougher time buying cars from other dealerships. Where they once could buy a vehicle they wanted outright, dealerships now want to trade a car, Steinke said.

"There's less dealers out there and higher demand," Steinke said. "The whole thing's changing right in front of our eyes."

Steinke said Cash for Clunkers has gotten people talking and thinking about buying cars. But the program took off quickly, and he predicted that interest would wane as people bought the cars they needed.

"I think there's going to be a saturation point in there, and it'll be interesting to see where that hits," Steinke said.

Comments

Duke_bets 5 years, 4 months ago

This is a huge line of BS. Are the dealers paying more for trade-ins that aren't in the clunker program. No! But, they are charging more to sell them. So, the dealers are making more money period. They get reimbursed from the government for the clunkers and then gouge the consumer who can't afford to buy a new car and use this as an excuse. A top buy in this recession is that of a vehicle. Most dealers are still sitting on 2008's that they have not sold. You can drive to Denver and not get screwed in the car market. Same vehicles as Steamboat, and yet you will pay $5,000 to $7,000 less on average for the purchase of a $30,000 vehicle.

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aichempty 5 years, 4 months ago

The poor pay more. Social engineering always turns out like this.

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Dan Hill 5 years, 4 months ago

Just what people who are really struggling in this economy need, for used cars to be more expensive. This is he standard effect of programs designed to buy middle class votes - screwing the poor.

And it's not even helping most of the middle class, just a few who are lucky enough to be able to work the system. The rest of us are paying for it in our taxes. I may was well just right a check for a thousand bucks to a random neighbor.

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