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'Cash for clunkers' deals siphon vehicle supply on lots

Dealerships are seeing a shortage of cars, particularly fuel-stingy models popular in the government program.

August 24, 2009|Martin Zimmerman

As the federal government's "cash for clunkers" program winds down, car buyers who go shopping over the next several weeks may find the selection a bit thin.

The clunker program, which ends at 5 p.m. PDT today, created such a stampede of buying during its one-month life that many dealers' inventories of new vehicles drained to bottom-of-the-pool levels. And used-car supplies, already tight, will get a bit tighter.

"You're not going to be able to find the car you want in September," said Rich Smith, chief financial officer of the company that owns David Ellis Chrysler Jeep in Canoga Park and Jack Ellis Glendale Dodge.

Glendale Dodge typically has about 200 new vehicles on its lot. Smith was down to 62 early Sunday afternoon -- and only four of those qualified for clunker rebates.

It's a common problem in an industry that went into the summer expecting lower-than-normal sales. Supplies are particularly tight for many of the fuel-efficient cars that have proved popular under the program, such as Toyota's Prius and Corolla, the Honda Civic and the Ford Focus.

"Inventory is a big issue," said Jesse Toprak, vice president of industry trends at online auto-pricing site TrueCar .com. Toprak expects auto manufacturers to be more aggressive with incentives and advertising to prevent a huge drop in sales after the clunker program expires.

"This is a momentum that they do not want to lose," he said.

Several automakers already have ramped up production to restock supplies of some of the heavy sellers under the clunker promotion. But dealers have noted that it can take 30 to 45 days for a factory to get more steel in the showroom.

The $3-billion clunker program provided rebates of as much as $4,500 to consumers who traded in a used car for a new, more fuel-efficient vehicle. Originally conceived as a way to get gas guzzlers off the road, the focus shifted to jump-starting auto sales, which had been in a slump for almost two years.

To qualify for the rebates, trade-ins have to be junked. With hundreds of thousands of vehicles taken out of circulation, there are concerns the program will add to what is already a tight used-car market.

"People who can't afford to buy a new car will face a real dilemma," said Garo Arabian of North Hollywood, who was shopping for a clunker deal Sunday on Brand Boulevard in Glendale. "It's like roses on Valentine's Day -- they're going higher."

Used-car prices already had been rising because the sharp falloff in new-car transactions -- especially leasing -- has put a big dent in the supply of previously owned vehicles, Toprak said. He figures that most of the cars turned in for rebates were in such bad shape that only about 20% would have been re-sold.

But Smith of Glendale Dodge still expects used car prices to head higher next month as buyers looking for scarce new cars settle for late-model used vehicles.

Dealerships along Brand Boulevard were seeing a steady trickle of customers Sunday. It was less impressive than the frenzy that greeted the clunker program when it kicked off July 24, but still a welcome change for dealers who had seen their showrooms turn into ghost towns this year.

"It was like the old days," sales manager Todd McGowan at Toyota of Glendale said of the program's early days.

"Yeah," a colleague chimed in, "like 2006, 2007."

Although the pop in sales has been welcome, dealers have complained about manpower shortages and computer glitches at the Transportation Department, which has struggled to process the wave of clunker deals that have flooded in. As of Friday, dealers had made nearly 500,000 clunker transactions, the government reported.

Several dealerships around the country stopped doing clunker deals last week. Some were running out of qualifying vehicles, but many quit because they were worried they wouldn't get reimbursed because of paperwork problems.

Some dealers with multiple car lots have more than $1 million in reimbursements hanging in the balance.

Congress already extended the program once, adding $2 billion after a surge in buying threatened to burn through the initial $1 billion in only a week. There appears to be little sentiment in Washington to consider another extension.

Shoppers, meanwhile, are scrambling to unload their own vehicle inventory before the deadline.

Karen Sicka of Pasadena was poking around Brand Boulevard looking for replacements for her family's aging fleet: a 1999 Chrysler Concorde, a 1993 Mazda MX6 and a 1998 Chevrolet Astro van.

They hadn't paid much attention to the program when it was first announced, she said. But then it hit too close to home to ignore.

"When we heard that two co-workers got clunker deals last week, that really lit a fire under us," Sicka said. "God knows, we've got a lot of clunkers."

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martin.zimmerman@latimes.com

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(BEGIN TEXT OF INFOBOX)

Top 10 new vehicles purchased

These were the top vehicles bought through the "cash-for-clunkers" program as of Friday.

* Toyota Corolla

* Honda Civic

* Ford Focus

* Toyota Camry

* Hyundai Elantra

* Toyota Prius

* Nissan Versa

* Ford Escape

* Honda Fit

* Honda CR-V 4WD

Source: U.S. Department of Transportation

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