Businesses See Drop Off As Vehicles Get Junked

From the Lexigton Herald

New car sales are up, gas guzzlers are being trashed and car manufacturers are busy again, all thanks to the federal Cash for Clunkers program. But some organizations dependent on the used-car business say they are being left behind.

Several Kentucky used-car dealers report sales problems because of Cash for Clunkers, although some say their sales haven't changed much yet. Charitable organizations that solicit used-car donations also seem to be suffering because of the program, which allows consumers to trade old gas guzzlers for rebates on new cars only.

Car-Mart in Lexington has actually seen increased sales, said purchasing agent John Nicholson.

"This thing has gotten people out, and they're excited," he said.

Jerry Dulaney, owner of North Broadway Auto Sales, had a different story.

"In the next 30 days, if the program continues, our sales will get slimmer," Dulaney said. "I think it will help the new car stores; they're selling a lot of cars, but it will only help them."

Dulaney also said Cash for Clunkers was making it harder for him to find used cars to sell.

"I sent someone out to look at a used Durango for me, and I was going to buy it for $2,000, but then the car became worth $4,500 under the Cash for Clunkers program," Dulaney said.

While Nicholson and Dulaney have had different experiences with Cash For Clunkers, both agreed that destroying the clunkers seems wasteful.

"I with they would give the car to someone who has a need instead of sending it off to get crushed, so it ends up as a patio table," Dulaney said.

Nicholson agreed: "They're destroying all of them, I wish they would make them available for people really in need," he said.

"Plenty of people really need cars now. When I see people driving cars with duct tape on the windows, it hurts me. If you have a car, it can help you get a job."

However uncertain used-car dealers feel about the annihilation of clunkers, non-profit agencies that collect used cars as donations are even less pleased.

"The effect has been pretty clear, and it's a distinct downturn," said Joseph Hearn, president of Advanced Remarketing Services, which runs a national vehicle donation program, Donation Wizard.

"I don't see any way around vehicle donations dropping due to Cash for Clunkers. The number of cars we have been getting has dropped 25-35 percent in the past 21/2 weeks."

Hearn said Donation Wizard generally gets several thousand vehicles a month and 80 percent of the profits are donated to non-profit groups including Habitat for Humanity, March of Dimes, the Breast Cancer Foundation, the Arthritis Foundation and NPR/Car Talk.

"There's no doubt about it, Cash for Clunkers has hurt the charities at a time when their services have never been more important," Hearn said. "In the last 20 years, car donation programs have become the default way of handling end-of-life vehicles, if they aren't taken to the junk yard. Cash for Clunkers is drawing right out of that channel, and because it's motivating so many people to get rid of their used cars now, the program will have a lingering effect on our donations, even after it closes."

Pete Palmer, vice president and co-founder of the national program Vehicle Donation Processing Center, said Cash for Clunkers started too recently for him to measure the effect on car donations statistically, but he was convinced fewer vehicles are being donated.

"There is no question that vehicles that would have been donated to us went to Cash for Clunkers and probably the better cars that we would have gotten," Palmer said.

The Vehicle Donation Processing Center typically receives 1,000 vehicles a week, garnering a profit of $60 million since 1996. The organization uses that money to support more than 400 charities, including some environmental charities, Palmer said.

"We're trying to take a bigger view of Cash for Clunkers," said Palmer.

"This program seems to be great for the environment, although the rules of how it applies are not as rigorous as Senator (Dianne) Feinstein and others wanted at first. However, there is still a big mileage difference between the cars people are trading in and the new ones they are buying."

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