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Clunkers become a new driving force for dealers

Federal incentives of up to $4,500 for exchanging gas guzzlers for new fuel-efficient models are jump-starting sales.

July 28, 2009|Tiffany Hsu

William Grammatica tried to replace his gas-guzzling 1997 Ford Explorer for two years with no luck. But all that changed Sunday with help from the federal government's new "cash for clunkers" program.

The Placentia accountant, 38, walked into Miller Toyota of Anaheim with his family and found a red Toyota Highlander marked at $28,000. But he got it for $23,500, thanks to the clunkers program, which was in full swing last weekend at auto dealerships across Southern California.

"It was a good opportunity to upgrade for better gas mileage while also being better for the environment," he said. "The timing was right."

Nearly 16,000 dealers nationwide have signed up to participate in the trade-in program, Transportation Secretary Ray LaHood said Monday after his department issued regulations for the program last week.

For The Record
Los Angeles Times Wednesday, July 29, 2009 Home Edition Main News Part A Page 4 National Desk 1 inches; 52 words Type of Material: Correction
'Cash for clunkers': A photo caption accompanying an article in Business on Tuesday about federal incentives to encourage motorists to trade in gas-guzzling cars for new, more fuel-efficient vehicles said William Grammatica and his wife traded in their 1992 Ford Explorer. As the article indicated, the couple traded in a 1997 Explorer.

By the weekend, deals of all kinds were being made. Chrysler dealers were offering as much as $4,500 for gas guzzlers -- and another $4,500 off as well. Hyundai reported that the program has been responsible for about 14% of July sales so far.

Under the $1-billion Car Allowance Rebate System, or CARS, the federal government will shell out from $3,500 to $4,500 depending on how much gas buyers save with the new car or truck.

By trading in his Explorer, which averaged 15 miles per gallon, for the more fuel-efficient 20-mpg Highlander, Grammatica was eligible for the $4,500 cut.

In a tough economy for automobile sales, dealers are hoping that the program helps them clear their lots. And based on the rush they saw this weekend, things are looking promising.

The program will end either Nov. 1 or when the $1 billion of federal money runs out. Customers hoping to cash in had better hurry, said Terry Miller, general sales manager of Galpin Ford in North Hills.

"The money will run out sooner than people think, so it's definitely a concern," he said. "We'll have to check regularly where the government is at with the money."

He believes the voucher fund will be dry by next month.

More than 800 calls about the program have poured into Galpin Ford since the dealership started offering the discount in early July, with nearly 25 customers just this weekend, Miller said.

The dealership said it has made more than 70 trades and expects dozens more, with the hybrid Fusion and Escape doing especially well.

But at Commerce Hyundai in Commerce, General Manager Ray Malhotra said he was unsatisfied with the number of deals he had made through the program since early July.

But after disappointing Fourth of July weekend sales, he said he appreciates any movement he can get. The dealership, which sells an average of 40 to 50 cars a month, has made five or six trades and has had to turn away several customers whose vehicles didn't qualify.

"It's bringing the extra people out, people who otherwise would not be buying cars," he said. "But the program is still barely getting momentum, so we're hoping to see more people come in."

Meanwhile, at Miller Toyota, General Sales Manager Juan Guzman said he expected the program to cause a 15% jump in new car sales.

"We thought this was either going to be the most phenomenal thing or the biggest bust in history," Guzman said. "Nobody had been doing well, but this was a shot of adrenaline to get everything started back up again."

In a lot behind the Toyota dealership, a dusty forest green 1989 Chevrolet Blazer with a busted front headlight that had been traded in for a 2010 Corolla sat with other "clunkers." But most of the cars were still in decent shape, Guzman said.

On Saturday alone, the Miller dealership made eight trades, including a 1985 Chevrolet Camaro for a 2010 Prius and a 1994 Mitsubishi Montero for a 2010 Sienna.

The trade-in vehicles must be 1984 models or newer and be rated no higher than 18 mpg in combined city-highway driving.

To deter people from buying a cheap older vehicle to try to make a quick profit off the program, cars must have been owned for at least a year to be eligible.

The program also requires dealers to disable and destroy the gas guzzler to prevent it from being resold.

State and local sales taxes are applied after the price reduction, which could result in additional savings for car buyers, officials said. But for California residents whose original vehicle was valued at less than the $3,500 or $4,500 discount, the difference must be reported as a taxable gain, according to the state Franchise Tax Board.

The rollout has had a few glitches. Some customers complained that dealers were giving them differing voucher estimates for the same car.

Others found the "cash for clunkers" nickname misleading because some older but fuel-efficient cars don't qualify.

A woman with a 1987 Corolla worth at most $500 was ineligible because her car gets more than 20 mpg and so was too fuel-efficient to qualify, said Guzman of Miller Toyota.

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