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Salvage yards see little effect yet from Cash for Clunkers
A boom in sales for new automobile dealerships from the Cash for Clunkers program has yet to trickle down to area salvage yards, and the program hasn't yet affected the business of used-car dealerships nationwide.
Donna Schuette, co-owner of Johannes Auto Sales in Jackson, said, "We've gotten 20 to 30 here but haven't started crushing the cars we've received yet, and we're waiting on about 30 more.
"We're kind of waiting to see if all the paperwork goes through from the dealers," she said. "Everything is on hold until the dealers make sure they get reimbursed for the clunkers from the government."
Congress approved the Cash for Clunkers program in June to boost automobile sales and help retire vehicles that are less fuel-efficient. Dealerships throughout the country ran ads encouraging customers to trade in their qualifying cars and trucks using a rebate between $3,500 and $4,500. The government originally set aside $1 billion to fund the program through Nov. 1 but recently pumped an extra $2 billion in the program after learning the funds were in danger of being exhausted soon after the program began.
The engines of the trade-in cars are destroyed and the vehicles are hauled off to salvage yards. Batteries, mercury switches, radiators and tires are removed.
The salvage yards have six months to sell the parts. Then the rest of the car is crushed and sold to a shredder.
Schuette said while the program has added extra business to some salvage yards and the automobile industry, the program does have its downside.
"Because we have to crush the cars it's taking away the engines from older vehicles on the road that may need them," Schuette said. "When those older cars need to replace that part, where will they find such an engine?"
"Some of the vehicles we've gotten are truly clunkers, but some are in such a good shape that it's a shame to take them off the road," Schuette said. "But those cars can never go back on the road once they are traded in at the dealership."
Joe Bob Baker, owner of B&B Auto Salvage in Jackson, said he has placed bids to area dealerships for their trade-ins but has yet to receive any.
"We're still waiting and hope to get some of the cars soon," Baker said. "The bottom line is that before we can get any, the dealers are wanting to make sure they get paid the money for their cars. And they have a right to be nervous."
While he said it will improve business for his salvage yard, Baker said the improvement will probably be short-lived.
"We'll see what happens in the next month or two and how much the government dishes out," Baker said. "In the last six months it's been up and down for us. People are looking more and more for used parts in an economy like this and the Cash for Clunkers will help us out somewhat."
Like B&B Auto Salvage, Junior Sinn Auto Parts in Cape Girardeau was also awaiting trade-ins from the Cash for Clunkers program.
Owner Junior Sinn expects the boom from the Cash for Clunkers program for auto dealers and salvage yards alike will be temporary.
"There could be a flood of cars that we'll get, and it will be a good thing for the dealers and those wanting to buy vehicles," Sinn said. "But I'm afraid after a while things will dry up again."
Sales may drop off
Meanwhile, Joe Whittaker, general manager of Car-Mart in Cape Girardeau, said he hasn't seen a drop-off in sales of his used cars but expects that to happen eventually. When it does, prices at the dealership will go up.
"We haven't been affected negatively, but [we] will be because they're clunking out cars we buy," Whittaker said. "In the long run it will raise the price of the cars 25 to 30 percent.
"I wouldn't go so far as to say a lot of us will close," he said. "But some of the small mom-and-pops might because they don't have a wide profit margin."
Nationwide, used-car dealers, particularly the smaller ones, have taken a beating. By some estimates, three of every five of the used cars turned in for government rebates would have ended up on used-car lots or resold for parts.
About 40 million used vehicles are sold a year, four times the number of new cars, said Keith Whann, an industry expert and chief executive of Columbus Fair Auction in Columbus, Ohio. About a third of used sales come for independent dealers.
Mom-and-pop dealers typically sell 20 to 25 vehicles a month and keep 40 to 45 vehicles on their lots, a fraction of the inventory for bigger dealerships, Whann said. So when the owner of a 1995 Ford Explorer opts for a new car and the old sport utility vehicle goes away forever, the repercussions are felt quickly.
But Glyn Jarrell, co-owner of Bud Shell's Auto World in Cape Girardeau, believes it won't hurt the used-car business in the long-run. He believes the second installment of funds into the Cash for Clunkers program shouldn't dry up as quickly as the first $1 billion infused into it.
"Overall it's helped our business," Jarrell said. "It's got people out and looking. And anytime you can do that and get people spending money, it's a good thing."
The Associated Press contributed to this report.
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