U.S. Car Dealers Bank On Cash for Clunkers

June 20, 2009; Andrew Grossman writing for the Wall Street Journal reported that car dealers and auto makers are laying plans to try to capitalize on the "cash for clunkers" provision in the war-funding bill passed by Congress this week. But analysts are skeptical that the program will provide as large a boost to new-vehicle sales as some expect.

Owners of vehicles that get less than 18 miles per gallon will receive a voucher worth up to $4,500 if they scrap their car and buy a new, higher-mileage one. The program is modeled on similar efforts that have boosted sales in Europe and is aimed at raising the overall efficiency of the nation's vehicles.

"This is a great excuse to contact somebody that was in a week ago, six weeks ago, six months ago," and try to sell that person a new car under the program, said John McEleney, who owns three dealerships in eastern Iowa and heads the National Automobile Dealers Association.

The $1 billion appropriated in the bill is enough to fund about 250,000 vouchers for new-car purchases. It isn't certain, though, that customers will rush to trade in their clunkers.

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