Life After Clunkers. What's Next for the Auto Industry and Car Buyers?

Sarah Lee

The reality that the CASH for CLUNKERS free lunch is truly over came with a roaring thunder this weekend as dealerships inked their final CARS deals amid hopes they'd get paid soon. Many dealerships are carrying upwards of a half-a million in receivables on unpaid rebates from Uncle Sam.

Meanwhile GM, Chrysler and Ford announced rapid ramp-up to get 2010 models to dealers by Labor Day, hoping to salvage the waning whiffs of ether from car buyers unaware the money for the CARS program is gone. Rick Glenn of Findlay Toyota in Henderson, NV was quick to point out, "Many of our new customers bought 2010 Prius', year-end 2009's or late-model used, even after realizing their aging Toyota didn't qualify for the program. Great fuel economy has always been a fact with our vehicles. Factory rebates and incentives smoothed the way to an easy trade-in."

However, some shoppers decided "to wait for the next program", after learning the dealerships had little selection left after the stampede on the $2 billion in second funding. Dealer Jim D. of Audi Henderson believes the program, while successful in clearing dealer lots of 2009's may have created a new wrinkle in the debate of promoting car quality and perceived value over rebates and incentives. "Thinning inventories were finally having a positive effect on the professional car sales process, putting a price=value discussion back into the purchase process."

Will Automakers learn from the struggling economy of the past twenty four months and can they manage the consumer's expectations?

Dealers will continue to control overhead by keeping inventory to a minimum as they watch buying patterns post-CLUNKERS. One dealer profit center crippled by the Clunkers program is the USED CAR LOT, where $5,000.00 "transportation cars" have been wiped out by the $4500-$3500 CARS trade-in rebate. Employees, students and those needing cheap rides have been forced to consider cars priced in the $6,000 to $10,000.00 range, taking on loans that add to the national credit-debt crisis. Meanwhile, CASH for JUNKERS buyers who found themselves pushed out of the new car market for trade-in or credit reasons, quickly gobbled up the $10,000 to $15,000.00 late model, off-lease, rental, and program pre-owned cars. The perfect storm of buying on the top and car-crushing on the bottom, left little selection in the used car spectrum, at higher than average prices.

The good news is the next windfall for the new car buyer is approaching. By early September, as 2010's start to fill dealer lots and CLUNKER-summer becomes an after-thought. ATTENTION: Owners of a nice trade-in, less than six years old and fewer than 80k miles, especially foreign name plates*; YOU will be able to enjoy a great deal on a new 2010, with reasonable incentives on interest rates: 4.99%-5.99% or rebates, along with a greater trade-in value. Dealers need nice trade-ins more than ever. Grab your best interest rate NOW as interest rates are expected to move upward by year end. BTW, forget the 0% days, they're gone too.

This is the next "GREAT TIME TO BUY a NEW CAR", and by extension, the used car buyer will find a wider variety of makes and models along with stabilized pricing by October through the end of the year. (Credit-worthiness will still be a major factor, so expect to put 20% CASH down on any purchase if your FICO AUTO score is less than 760.)

All in all, if the dealers get paid for their CLUNKER deals quickly, the program will be herald as a great idea. However, if the slow pay continues, the country may find itself minus more car lots; putting a chill on motivated buyers and deep freezing the dealer's ability to buy 2010's?creating another car wreck in the economy.

1. Toyota Camry
2. Honda Civic Sedan/Coupe
3. Honda Accord
4. Nissan Maxima
5. Toyota Solara
6. Nissan Sentra
7. Toyota Avalon
8. Toyota Prius
9. Honda Odyessy
10. Nissan Altima

Author SARAH LEE Marks is a 20+ yr. veteran of the automotive industry. Her company MY CARLADY, assists consumers in all aspects of the car buying process. You may contact her at 702-521-7546 or [email protected] with car buying questions or visit her website; for the latest edition of her e-book INTERNET CARBUYING Guide.