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‘Cash for Clunkers’ Revs Up Car Buying

It may not be the salvation of the auto industry, but the government’s offer to buy gas guzzlers for up to $4,500 apiece is bringing buyers into San Diego County new car showrooms.

The new federal program goes by the acronym CARS, though some prefer its colorful, unofficial name: “Cash for Clunkers.”

Bill Drew, president of Drew Auto Center in La Mesa, said he made 25 sales at his Ford, Hyundai and Volkswagen dealerships July 28, the first day his staff started offering trade-ins under the CARS program.

The federal government finalized program rules on July 24. Some dealers began offering the discounts the weekend of July 25.

The program “should close out July strong and give us a strong start to August,” said Drew.

When new car customers turn in their old, inefficient models, dealers give them a discount of $3,500 or $4,500 , depending on the year, make and model of vehicle turned in. The government has promised to reimburse dealers for that amount.

“We definitely are seeing business,” said Dave Grundstrom, chief executive with the Marvin K. Brown Auto Center in Mission Valley. “People have been waiting for the program.”

By July 29, Grundstrom said he had sold one Buick, three GMCs, two Mitsubishis and one Suzuki under the program. The finance department was processing several other deals, he said.

Grundstrom said salespeople typically have to do a lot of explaining about the program, walking customers through complex rules.

There must be a significant increase in gas mileage from the old car to the new one. The old cars must be 1984 models or newer. Customers must have owned and insured their vehicles for at least one year. And it’s one vehicle per customer. Fleet managers are ineligible (although Drew said he has processed a couple of registrations for small-business owners).

Dealers are on the hook to provide Uncle Sam with documentation that the cars they receive meet all government rules.

Like previous auto industry programs, such as zero percent financing and General Motors’ employee pricing, the Cash for Clunkers program might provide enough of a push to get vacillating consumers to make a decision and go to a dealer, said Michael Belch, a San Diego State University marketing professor who specializes in consumer behavior.

And while it’s not a big fix for the auto industry, “I think it will help to get things moving a little bit,” Belch said.

Similar programs have helped European countries get rid of polluters, Belch said, though he added those governments did not pursue the programs during recessionary times.

Some auto dealers are combining the CARS program with other incentives. Chrysler dealers, for example, have been pairing the government incentive with a matching $4,500 price cut.

The trade-in program has left Drew with 25 autos which, by federal law, must be taken off the road for good. They must either be crushed or shredded.

That might mean more business for David Street, co-owner of West Auto Wreckers in Chula Vista.

Street said he recently fielded calls from 25 new car dealers, inquiring about the wrecking yard’s procedures. Street does not have a crusher permanently on site but he brings one in periodically. Though the engine block must be destroyed, Street will have the option of salvaging other parts off the cars, under federal rules.

If he winds up with 400 to 500 autos that need processing, Street says he might have to do some hiring.

The government is spending $1 billion to buy back up to 250,000 cars. The incentive program lasts until Nov. 1 , or until the government runs out of money.

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