President Obama is expected to quickly sign into law an extension of the Car Allowance Rebate Systems (CARS or "Cash for Clunkers") program –which gives car owners $3,500 to $4,500 for trading in old cars that use a lot of gas for newer, more efficient vehicles.
There’s a lot of poor people, there’s a lot of ministries, there’s a lot of others that could probably benefit from easy access to an older, cheaper car. But that market now is going to be impacted, or impinged, by what amounts to a series of political decisions…. And that is always the danger when government intervenes and starts having the Congress or the Legislature start making decisions, instead of the marketplace…
It makes everybody feel good, but because we own GM, we’re just paying ourselves back. It seems a little odd.
If only Governor Pawlenty would follow his own advice and stop "politiciz[ing] economic decisions," he would understand that the "Cash for Clunkers" program boosts the economy by providing incentives (taxpayer dollars) to taxpayers who purchase a durable good which will continue to pump private dollars (car payments) into the auto-industry, resulting in both economic and environmental benefits.
But, Governor Pawlenty’s comments seem to be aimed at a national audience, because they certainly don’t reflect the reality here in Minnesota, where more than 7,500 Minnesotans have requested vouchers. One analysis suggests that Minnesota has received $5.06 per capita (totaling $26.2 million) in benefits from the CARS program. In fact, the survey found that residents of cold states like Minnesota are trading in their clunkers at much higher rates than those in sunbelt states where the cars don’t have to deal with the effects of rust and salt.
Dealers say buyers are predominantly older drivers who own more than one vehicle and have a clunker to spare.
"These were not people that we would see normally," said Jim Paul, co-owner of four Pontiac-GMC-Buick dealerships near Minneapolis, suggesting sales at his showrooms could return to normal when the program expires rather than drop off, as some economists have suggested.
If Paul is proved right, the program could give the economy a legitimate lift.
Car companies say "cash for clunkers" made July their best sales month of the year. So far, 83 percent of trade-ins have been trucks.
Tom Crann of Minnesota Public Radio’s "All Things Considered" checked back in yesterday with Jim Leonard, co-owner of Fury Motors, to see how the program was affecting dealers. Calling Cash for Clunkers a "very big success," Leonard says that it brought his dealership new customers who wouldn’t have otherwise come in, without hurting sales to normal customers. Listen to the audio below:
LEONARD: At the end of the day, if the government didn’t fund it, the customer would end up bringing the vehicle back.. or having to pay the $4,500.
CRANN: So the Senate goes ahead and approves another $2 billion as expected. How concerned are you about watching those new cars drive off the lot with that extension. Does that make you more confident?
LEONARD: Absolutely, it makes us much more confident because until yesterday, I had not received any funding on any single deal and we’ve done roughly 100 deals on the clunker program. And so, we have in math, almost half a million dollars of government-guaranteed money that we hadn’t seen anything yet. So that was a tough way for us to do business — completely out of our normal way of doing business — because we’re not dealing with an entity we’ve ever dealt with before.
CRANN: So what is the bottom line for you and your dealership here — Cash for Clunkers: big success or not?
LEONARD: Very big success. It stimulated part of the business that — I think it’s a home run. As far as the traditional new car purchaser was trading in a car that was, on average, 42 months old. The people who were trading in clunkers, those vehicles didn’t qualify under the program. So this brought us roughly about 100 customers who might not have otherwise bought new cars or would have spread that out over a much longer period of time. So I think it did put a lot of new, different customers into the car business and I don’t think it pulled ahead customers that we had hoped it wouldn’t. One of the concerns when you do a lot of business in a short period of time is that the next two or three months become very quiet. But that was not the traditional customer that came in and purchased under this program.
CRANN: How much have your sales gone up since the "Cash for Clunkers" program began — it was July 24th, right?
LEONARD: Yes, July 24th is when they announced the rules of the program. Our business went up roughly 3-4 times our traditional time period of that last part of the month. And, in that, next full roughly 7 days, we did about 80 units in that 7 days, where we normally would do maybe 25-30 units in that 7 days. And that is a solid — that would be a normal month of new car business for us — or even slightly more than that.
Sounds to me like the program is doing what President Obama intended it to do — give the economy an extra boost while taking old, environmentally-unfriendly cars off the roads.
Governor Pawlenty seems intent on following the lead of Republican party leaders, making economic decisions based on political calculus, at the expense of hard-working Minnesotans like Justine Zirbes, who wouldn’t be buying a car if
not for the "Cars for Clunkers" bargain.
Fortunately, Governor Pawlenty is not President Pawlenty and President Obama understands that the program helps our economic recovery. Because of President Obama’s leadership and the help of his Minnesota allies in the Senate — Sens. Al Franken and Amy Klobuchar — Justine can now trade in that "rusty old truck" and buy a newer, fuel-efficient vehicle.
To learn more about the Cash for Clunkers program, visit www.Cars.gov.
Photo: Daily Press