Wednesday, September 2, 2009

Used car dealers hurt by CARS

Several local used car dealers said they are having to pay more for the cars they buy and then pass the higher costs on to customers, and that their used car sales are down since the popular Cash for Clunkers program began.

The dealers said they believe these problems are because of the federal program, officially called the Cash Allowance Rebate System (CARS).

CARS, which ended Monday, offered car buyers rebates of $3,500 or $4,500 for trading in older vehicles for new, more fuel-efficient ones. The clunkers were taken off the road and crushed.

According to reports from The Associated Press, about 690,000 vehicles were sold during the program.

Gene Ward, owner and operator of Broadview Auto Sales in Martinsville, estimated that his used car sales are down 40 to 50 percent. For example, he said last week he had sold four cars so far in August compared with eight normally by the same time of the month.

Ward also estimated he is paying 15 to 20 percent more for the cars he buys to sell at his business. Because so many used cars are being crushed due to the CARS program, there is a smaller supply of used cars from which dealers can buy, which drives prices up for dealers, he said.

Marjorie Richards, owner and operator of Quality Motors in Martinsville, said CARS “has hurt us tremendously in being able to buy used cars.”

She agreed that because many used cars have been taken off the road and crushed in the CARS program, which decreased the supply of used cars, and the prices have risen.

Richards estimated that Quality Motors is having to pay $1,000 to $1,500 more per vehicle. She said it passes on about three-quarters of the extra cost to the customer and absorbs the rest.  Because of the high unemployment rate in this area, “we’ve had to drop back” to selling mostly mid-price vehicles in the $5,000 to $8,000 range, she said.

Seventy-five percent of $1,000 to $1,500 would amount to about a $750 to $1,125 extra cost for the customer.

Quality Motors sales are down about 25 percent since CARS began, Richards estimated.

Anthony Martin, owner and operator of ATM Motors Inc. in Martinsville, said he had not noticed any difference in his used car sales, but he estimated he is having to pay 10 to 15 percent more for used cars at auctions because there are fewer cars available. Since he is keeping his retail prices about the same, that means his profits will go down 10 to 15 percent, he estimated.

Danny Foley, a salesman at Foley’s Used Cars, a family business in Bassett, said, “It’s hurting used car sales, because everyone is going to new car sales” who can qualify. “It would be nice for the government to help us (used car dealers) sell cars. We could use the money, too.”

Foley guessed that sales are down about 35 percent at Foley’s Used Cars since the CARS program began, and he said the company is having to dip into savings to help make ends meet.

Some people traded in low-mileage vehicles and then bought new vehicles through CARS, Foley said. He said he saw a “super nice truck” with 87,000 miles traded in (and ultimately will be crushed) that “I wouldn’t have minded having” — a vehicle that probably could have been driven for years and many miles longer.

Roger Merricks, manager of Pugh’s Auto Sales in Martinsville, estimated his business is paying $200 to $500 more per vehicle because the supply has decreased, a cost that Pugh’s has to pass along to its customers. He also estimated that car sales at Pugh’s are down about 40 to 50 percent since CARS began.

Merricks expressed some of the same concerns — fewer used cars and higher prices — as some of the other used car dealers. He also said he thinks CARS will hurt automotive salvage yards because parts will be harder to come by since many vehicles are being crushed.

Barry Nelson, vice president of Nelson Automotive Family, said he believes that rather than hurting the used car business, CARS helped it and that used car sales have improved at Nelson Automotive Family dealerships.

He said he believes the decline in the supply of used cars now is due mainly to the fact that, when the economy slowed, auto manufacturing did as well. As a result, people bought more used cars then, reducing the supply now, he said.

But now the economy is improving, car manufacturers and suppliers are working more people, customers are buying after putting off car purchases for months, and the demand for new and used cars has improved, Nelson said.

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