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Cash For Clunkers Fallout

July 7, 2010, 10:05 PM by Ben Dunsmoor

Cash For Clunkers Fallout
SIOUX FALLS, SD - Cash for clunkers is in the rear-view mirror. The popular program replaced nearly 680,000 clunkers with new cars last year after the government offered rebates for every driver who junked their old car.

Thousands of American's caught on to the cash for clunker fever, racing to dealerships to cash in their old car for thousands of dollars, and South Dakota was no exception. 

"It was great for the customers.  It was great for the car dealers and also helped get manufacturing going again, so it was good for the manufacturer as well," David Billion with Billion Automotive said.

The promotion was started last July as part of the stimulus program. The government wanted to replace old gas guzzlers with new fuel efficient cars. It also wanted to rev the engine of the ailing American auto industry. To accomplish the goals, the government gave car owners $4,500 for their clunker. All told they paid out nearly $3 billion for the popular program, and Billion Automotive sold 1,000 of those cars. 

"It was something we've never experienced before where there were a lot of customers that were waiting for the vehicles to come in, buying them right off the back of trucks. There were a lot of things we hadn't seen for years and years," Billion said. 

Reflecting back on the cash for clunkers program Billion says he thinks it did help get the large American car manufacturers back on track. 

"They also cleaned out some inventories, which the dealers are the customers to the manufacturers, so with the dealers selling more cars they ordered more cars so it did help get the factories going again," Billion said.

A report from the Department of Transportation after the program was over estimates cash for clunkers saved or created 60,000 jobs and kick started the car industry.

"There's a definite sign of recovery in the economic world and the auto industry. So I'm very encouraged by what I see. Plus, the product line is better. I mean GM is building some of the best product, as well as Chrysler, Jeep and Dodge," Billion said.

But the program only applied to new cars and left used car dealers in the dust. Those dealers say they are still feeling the effects a year later. 

"The demand is just as heavy as it was earlier; it's just that the supply is a lot thinner than before," Dusty Johnson of Big City Motors said.

Big City Motors on West 12th Street in Sioux Falls says there aren't as many used cars under $5,000 to choose from any more because they were all gobbled up by the government program. They're seeing prices for the remaining cars going up.

"You have all these people still looking for that car that is under the $5,000 price, but what was maybe $1,000 before has now come up to $1,500, maybe $2,000," Johnson said.

Big City Motors says it still has several cars on its lot because it also has consignment sales for used car owners looking to get rid of their vehicles, but if it wasn't for that part of the business, cash for clunkers would have wiped out the inventory.

"A lot of them, they're impossible to go out for a dealer to purchase. We have to rely on them being consigned with us," Johnson said.

But ultimately the cash for clunkers program did what the government wanted it to do by putting the auto industry back on the road to recovery.

The U.S. Department of Transportation also estimates Americans will save 33 million gallons of gas every year because of the cash for clunkers program.

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