Post-Cash for Clunkers Outlook for New Car Dealers

Following the chaotic “gold rush” atmosphere created by the Cash for Clunkers program, many new car dealers are now left with nearly empty showrooms and few customers looking to buy them.

National Automobile Dealers Association vice chairman, Edward Tonkin, says, “We’re definitely going to have a hangover.”

The federal CARS program was halted last night at 8:00 p.m. EST, but dealers have been granted additional time to file voucher applications due to a problem with the Department of Transportation Web site. The new submission deadline is 8:00 p.m. EST on Tuesday.

By yesterday morning the Department of Transportation was reporting that new car dealers had submitted 625,000 CARS applications seeking $2.58 billion in reimbursements.

For many dealers, the return to “business as usual” may be a difficult transition.

In addition to his vice chairmanship with the NADA, Edward Tonkin is also vice president of the Ron Tonkin Family of auto dealerships in the Pacific Northwest. He expects sales to take an immediate nosedive, back to pre-CARS program levels. Standing in the showroom of one of his dealerships, he says, “I think you’re going to be able to shoot a cannon through here and not hurt anybody.” CEO, Jeremy Anwyl, says, “I think we’re going to see a decline of about 40 percent in the immediate aftermath.”

New car shoppers who do venture onto dealer lots will find depleted inventories and, consequently, higher prices.

Anwyl says, “This is the first time in years that if someone came in and said they were thinking about buying a car, I would tell them to wait.”

Even before the CARS program ended, dealers were running critically low on inventory and buyers were having to take what was available. For some, that meant accepting a car or truck in a color other than their first choice. For others it meant spending more on features they didn’t want in order to take advantage of the rebates.

Automakers have reopened factories and added shifts in an effort to replenish their inventories.

Many auto industry analysts had predicted a slow but steady increase in auto sales this summer, even before the federal government intervened with the CARS program.

Gary Dilts, J.D. Power and Associates senior vice president of global automotive operations remains optimistic. “Improved consumer confidence and credit availability during the past six months, “he says, “have combined with the CARS program to lift industry sales out of their slumping year-to-date levels, which have been down approximately 35% year-over-year.”

Once new car inventories are restocked, Anwyl expects dealers to begin offering new incentives averaging about $3,000 and says that he would recommend waiting until “probably November” to anyone considering buying a new car this year.

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