Thursday, July 30, 2009

Limited time offer! Act fast! 

The Cash for Clunkers program might run out of money sooner than anticipated.

Car dealers on Wednesday began expressing concern that the government's "cash for clunkers" incentive program could run out of money as soon as the end of August due to strong initial response from consumers.

"It's important for customers to act because we don't know when the curtain is going to fall on this thing," said John McEleney, chairman of the National Automobile Dealers Association.

I was suspicious when I read that this morning, because it sounds like one of those "limited time offers" to boost demand through expectations that the price will rise later. Moe Tkacik reported yesterday that we were even seeing some people trade cars worth more than the $4,500 maximum rebate. (Of course, just because a car has book value of $5,500 doesn't mean someone will give you that in cash for it.)

But people in the auto industry here in St. Cloud reported that this was so; the buzz was that they could even run out of money in two weeks. Again, I think they're saying this to increase business. (Notice that the program begins before 2010 cars are off the lots, so this isn't increasing demand as much as helping auto firms work down inventories. That actually would work against higher GDP numbers in Q3, since a decrease in inventories is a subtraction from GDP. I knew you wanted to know that.)

And there's a catch in this that one person told me this morning. Before they were credited their $4,500, the buyer was told by the dealer to sign a waiver that put them on the hook to pay the $4,500 to the dealer if the car was for some reason declined by NHTSA. Here's a webpage saying the same thing, and advising you not to sign it. For them to file the paperwork they have to destroy the car. If the car is declined and you signed the waiver, your car is now worth $25 (at least up here with the local scrapyard.) You're now out $4,475. Some people sign the waivers, while others don't want to accept that risk. And yet the report is that this is successful?

The local Toyota dealership, when presented with a CARS transaction by a potential buyer of a Prius, threw up its hands and said it didn't know how to work with the program. That person now owns a Ford. Of course, my skepticism is such that I figured the Toyota guy knew his Prius would sell at any rate and didn't want the hassle. Another consumer information site dedicated to CARS includes an email from another Toyota dealer:
The 30 dealerships I know have more than 1200 cars sold and are more in the 40% range submitted. If the rest of the country is anywhere close to us it sure seems like a billion will go lightning fast.

I am not saying that there may be a possibility that this will all slow down soon , but PLEASE don�t blame dealers for hyping this. I wouldn�t pay five cents to promote or advertise for customers. I am terrified that I will not get paid the roughly $300,000 I need to collect from Uncle Sam right now.

Come on out to my dealership and watch people who are working 18 hrs a day to process your deals and tell me you think WE are hyping anything. If the money runs out early it is the dealer who will be screwed.

Trust me, they either will add money to this or it will be over soon. Not saying that to get you in the store either. I don�t need any more deals. I need to get paid on the deals I have already done.
So when government health care gets started and you go to get that health care that the mean insurance companies deny you, and the claims pile up from medical care providers at the new Medicaid-for-all, who is going to process? How many will be denied? According to one man I spoke to this morning, a fellow was making a deal and had to verify, among other things, that he had owned the car for a year. No problem, he said, here's a copy of my insurance policy statements for the last two. Not good enough, he was told, he had to have a letter from his insurance agent on the agency's letterhead, faxed to the dealership, in order to provide the government with the documentation they wanted.

These are the people who want you to trust them with your health care.