Automotive: Cash for Clunkers

The Cash for Clunker Bill Stimulates Economy Before the Government Cuts the First Check

Automotive Stimulus Program Pumps Millions of Dollars into the Economy Through Spending By Manufacturers and Dealers Preparing To Cash in On the $1 Billion Opportunity

The governments Cash for Clunkers program (C.A.R.S.) began stimulating the economy a month before the first rebate check was cut to a consumer for a new vehicle.

"Manufacturers and dealers have spent millions to reach consumers who qualify for the $4500 government funded rebates," said Sharon O'Connell from www.CashForClunkersInformation.org.

Big budgets have been activated to implement campaigns targeting clunker consumers who are eligible for the program and the early results suggest the returns will be worth the investment.

"We predict that the annualized selling rate for July will exceed 10 million vehicles for the first time this year due to the government program bringing dormant consumers back into the market," adds O'Connell. "We think August could do even better with a million or more sales due to increased demand from the CARS program."

"The stimulus helps local markets more than national car companies because car dealers stimulate the local economy through their big advertising expenditures, job creation and enormous state tax revenue," said O'Connell. "A small dealership who sells 100 vehicles a month spends an average of $500 per car in advertising, which is a total of $50,000 that is spent in local advertising."

Courtesy Chevrolet, one of GM's largest dealerships in the country, "bought new inventory, hired additional salespeople and increased our ad budget by 88%," said Scott Gruwell. "We spent $200,000 on a targeted direct mail and web campaign to every customer in our market and we launched a regional information portal called www.CashForClunkersDC.com," said Vince Sheehy, owner of www.Sheehy.com in Washington, DC, Virginia, Maryland and Baltimore. "So far we have sold over 100 vehicles while most dealers in our area are just getting started."

Since over 80% of consumers initiate their vehicle searches online, Automotive Manufacturers and retailers have spent a lot of money online. Ford Motor Company is promoting its program on their home page where consumers can link to a website that promotes Ford models that qualify. The New York Honda Dealers Association initiated an integrated campaign weeks before the final ruling to send a targeted mailer to every qualified clunker owner on the Clunker List in New York while most other brands were focused solely on expensive television advertising. The Association also created a regional website, www.NYCarsProgram.com, to educate New Yorkers about the program.

"Honda is the most popular brand in the New York market and nearly all Hondas qualify for the Cash for Clunkers program, so we launched an interactive website to educate the public," said Rob Sabbagh Jr., representing www.NYLIhonda.com. www.NYCarsProgram.com provides program information, a clunker calculator and a multi-media consumer tutorial that highlights the fact that nearly every new Honda qualifies. "You don't really need a complicated chart to find a qualifying vehicle at a Honda dealer," said John Mendel, executive vice president of American Honda Motor Co., Inc.

Early Spenders are the Early Winners

Most of the economic activity generated up to this point has come from early spenders who also appear to be early winners in the race to reach clunker consumers. The winning retailers have been marketing to consumers for weeks while others are just getting started. Hyundai and a small group of dealer groups got a head start when they announced they would help consumers participate in the program starting on July 1st, while others were turning them away until the final rule was published on the 24th. The NHTSA and the National Automobile Dealers Assn. warned dealers against doing transactions before the final rules were announced on July 24th.

Despite these warnings, Hyundai and a few dealers took the risk to help consumers get rebates when the law said they could. "Hyundai has attributed 10 percent of July's sales to the program and some dealers have generated hundreds of incremental sales," said O'Connell.

"We quickly created a program that helped consumers take advantage of the program and it has helped our sales a lot," said Rick Case, who has 6 Hyundai stores as a part of one of the most successful automotive groups in the country. "So far all our sales are conquest sales.

More than 70% of the clunkers were Ford or Chevy trade ins, 71% of the clunkers were SUVs, 93% had over 100k miles and 71% qualified for the $4500 because SUV's only need a 5 mpg improvement to get the full $4500 rebate. The average clunker trade in gets 17 mpg and the average new vehicle gets 25 mpg, which is an average of an 8 mpg improvement," explained Case.

"We had over 100 orders by the time the final rule was announced and our customers appreciated the fact that we could help them when they were turned away by other dealers that weren't ready," said Vince Sheehy from www.Sheehy.com. It turns out their strategy was not very risky because the Consumer Assistance to Recycle and Save Act clearly states that consumers are eligible for rebates starting July 1st. "Edith and I, (Edith Singer, CEO of Paragon Automotive), did our homework and we realized the law could not change so we decided to help consumers on July 1st and it gave us a 24 day head start," said Brian Benstock from www.ParagonCars.com.

"One of our Honda stores had thousands of leads before the bill was signed into law and they have delivered over 40 vehicles before the final rules were announced on the 24th. All of the clunkers have been conquest sales so it is all incremental business. It is a jump ball for the clunker customers in our market and we are glad we jumped early." Some of the dealers who experienced a lot of success are scrambling to source more inventory to ensure they can satisfy the new increased demand. "We just bought over 100 accords and civics to make sure we have enough vehicles before our next shipment," added Benstock.

www.CashForClunkersInformation.org is a private consumer information portal, not a government website, so it is designed to give consumers a summary of the program with tools to help them determine how much funding they qualify for. The organization is proud to have been an important advocate of the congressional bill and now continues to serve as a voice for the public to encourage retailers and manufacturers to offer additional incentives to consumers to get into more fuel efficient vehicles that will help the environment, the economy and their industry.

www.CashForClunkersInformation.org also helps retailers educate consumers in their local area about the Cash for Clunkers program. www.CashForClunkersInformation.org was created by Level 5 Advertising, a marketing company who provides communication services to some of the largest automotive retailers in the world.

About the Name - Cash For Clunkers

While making its way through congress there were many bills with many names so the public and the press commonly referred to all versions of the bill as the "Cash for Clunkers" program. For this reason many consumer information sites, including ours, have utilized this universally understood term to refer to the many automotive scrappage programs that exist in the world, some funded by the government (C.A.R.S) and others financed by automotive retailers. To learn more visit www.CashForClunkersInformation.org

Source: CashForClunkersInformation.org
NEW YORK, July 28, 2009 /PRNewswire-USNewswire/ --