The Cash for Clunkers program is helping automobile dealers get rid of their 2009 models. But there are questions about whether those dealers can afford to bring in the 20-10 models.
The program is an indication that the consumer credit market has loosened up—because consumers can get loans to buy the cars that replace the old heap.
Manufacturers do not give cars to dealers to sell for them. The dealers have to buy the cars from the manufacturers. And the financing companies dealers work with have not loosened the purse strings yet.
Missouri Auto Dealers Association President Sam Barbee says the sales of cars under the cash for clunkers program does not leave dealers with a pot of money. Barbee says the profit margin for new car dealers is about break-even. Usually they make a profit by selling the used car. But that can’t be done here. The clunkers have to be sent to a junkyard and eventually to a crusher.
They don’t make a profit on the 35-hundred to 45-hundred dollar trade-in credit because the government will reimburse them only for that amount.
Barbee thinks financing companies eventually will understand their reluctance to help finance new vehicles in dealerships is unnecessary because most dealers are good businessmen.