Auto Dealers Report Slower Sales but Remain Optimistic

Just a few short months ago, car dealerships were scrambling to keep up with record sales and the constant flow of prospective buyers through their showrooms. Considering the deal making, paper work and inventory management, dealers and their staff in many areas of the U.S. were busier than they had been in years.

The CARS program ended almost a month ago and, today, dealer showrooms in many areas of the country are a lot quieter than the staff would like them to be. When voucher availability stopped, the record sales also came to a screeching halt. Many dealers report that once again, inventory is remaining on their lots.

The popular cash for clunkers government rebate program offered owners of vehicles with a less-than-desirable fuel efficiency vouchers of up to $4,500 for use toward the purchase of newer, more efficient vehicles. The aim was to aid the economy while improving the nation’s air quality through lower carbon emission levels.

The program was wildly popular, had to be almost immediately re-funded, and ended abruptly on August 24th. With no more vouchers to offer, dealers are wondering what the end of the year holds in store.

Adam Silverleib is the manager of Silko Honda in Raynham, Massachusetts. In a recent interview, he reported sales were very brisk this past summer, and the staff at the dealership was kept busy with mounds of paperwork and new car sales. He reports now that they are “kind of back to where we were in the spring.”’

New car sales through the clunker voucher program reportedly reached 700,000. Although the government paid almost $3 billion for the program, most dealers who participated are still waiting for their government checks.

Many financial analysts expressed skepticism over the possible effects of the CARS program, saying that overall sales for 2009 would not be boosted by the voucher system. Senior auto analyst for IHS Global Insight John Wolkonowicz says, “It was probably, in the end, a complete waste of taxpayer money. The dealers, who were supposed to be the primary beneficiaries, many were forced into cash flow problems because the government didn’t pay them in a timely fashion.”

Dealerships around the country are reporting only being paid for a fraction of what is owed them through the CARS program. Many, however, are grateful for the added business. Some, like Cityside Subaru of Belmont, Massachusetts, are reporting that the government has kept up with its payments. Cityside has currently been paid for all but one of the 51 vehicles sold under the cash for clunkers program. General manager Richard White considers the program a boon for his business, reporting that “by every measure, the program was extremely successful for us.”

Although the government is beginning to catch up on the paperwork and is issuing checks to dealerships, their work is far from over. The Department of Transportation has said that so far, about 83% of the vouchers requested have been approved, and work continues to finish the payouts. Earlier this month, the National Highway Traffic Safety Administration set September 30 as its target for completing the reimbursement process.

Automakers and dealers are hoping to lure more customers into showrooms with fall deals and incentives. So far, the sales slump has been discouraging, but hopes are that customers will want to purchase new cars this fall to take advantage of available incentives and fuel efficiency tax deductions for this year.

Most automakers have also expressed optimism that sales will increase in early 2010. GM has announced an aggressive ramping up of production in anticipation of increased demand in the New Year.

Posted in In the News

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