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'Cash for clunkers' gains momentum

To try to clear up confusion about the federal "cash for clunkers" program, Town & Country Chevrolet has set up a visual in its Ashland lot.

An '80s clunker, draped with caution tape, plunges front-first into a dumpster, behind a sign announcing the car trade-in opportunity.

The new program is designed to get gas-guzzling, polluting cars off the road — but it's also been good for business, said Karl Blust, the dealership's general manager.

"It's been very popular," he said. "I think it makes sense to clean up the air."

On Monday afternoon Blust was helping a customer trade in an old car for a new one, an Aveo. After the "cash for clunkers" discount and other savings, the customer ended up paying about half the standard price for the car, he said.

"It's a good deal," Blust said.

"There's no doubt that newer cars are safer than the old cars and the older cars do get poorer fuel mileage," he said.

The Car Allowance Rebate System program was signed into law in June, but details weren't finalized until Thursday.

Dealers were allowed to register with the National Highway Traffic Safety Administration to participate beginning Friday morning.

Some began touting the much-discussed program weeks ago, and customers quickly responded. Crater Lake Ford sales manager Mike Frame said the dealership already had deposits for some purchases prior to Friday and another 50 customers had indicated they were ready to buy.

"It's good for dealers and sparked interest from people who may not qualify," Frame said.

"We expect to be extremely busy for the next week to 10 days."

The government estimates the $1 billion program will generate sales of 250,000 vehicles at the nation's 19,700 new-car dealers. If the anticipated sales were spread evenly among all the dealerships, it would amount to about 12 cars per dealer.

To qualify for a voucher, buyers must trade in a vehicle rated at no more than 18 miles per gallon when new, and buy or lease one that gets at least 22 mpg. The mileage standards refer to a model's combined city and highway rating by the Environmental Protection Agency.

A new car with a 4-mpg improvement in fuel economy qualifies for a $3,500 voucher. Cars capable of 10-mpg improvement qualify for $4,500. The eligibility requirements are different for trucks.

Owners need to prove their trade-ins have been registered and insured throughout the past 12 months.

"It's a very complicated, detailed program and you have to do everything exactly right, crossing the t's and dotting the i's," said Chuck Butler, who operates Ford, Kia, Hyundai and Accura dealerships in Jackson County. "One customer seemed to have everything right, but she let her insurance lapse for three months and didn't qualify."

Butler said the program is a boon for people whose cars are worth little on the market.

"If they are driving a vehicle worth $200, all of the sudden it's worth $4,500," Butler said.

"We have a Kia Rio with a $3,500 factory rebate. Along with the government rebate, the old $200 car is worth $8,000. It's a huge discount where there was none before."

Among other rules, dealers are required to render engines inoperable and then deliver the car to certified wrecking yards for dismantling. The rule prevents dealers from reselling the trade-in vehicles instead of scrapping them because the goal, after all, is to remove gas-guzzlers from the road.

Butler said Hyundai reported the early trends from the program point to annual savings of 69 million gallons of gas, $170 million in fuel costs and a reduction of 600 metric tons of carbon emissions.

"The real stimulus," Butler said, "will come from dealers reordering cars and getting auto workers back to work and getting the manufacturers running again. They've been stopped for a long time with these bankruptcies. I think inventories will drop below the optimum level (60 to 90 days) and everyone will work toward having an optimum level, when inventories are down everywhere and dealers will want to restock."

The legislation itself paints a somewhat less rosy picture.

"Manufacturers' and dealers' employment levels are unlikely to be impacted by the (legislation)," the 136-page document stated.

"The impact most likely (will) not be large enough to increase production by manufacturers, and dealers on average will only be selling an additional 12 vehicles."

Although the cash for clunkers was authorized until November, it will end as soon as the $1 billion in funding is exhausted.

"My Ford rep said this will be done before the blink of an eye," Frame said.

While buyers receive the credit toward the purchase, registered dealers will receive funds from the government via electronic transfer.

"I would hate to sell 20 cars tomorrow and then three weeks from now not get paid," Frame said. "I'd be out $90,000."

Mail Tribune reporter Greg Stiles contributed to this report.