Rolling Out 'Cash for Clunkers'

Car Dealers Set Up Hotlines, Web Sites but Fret That Strict Rules Will Hurt Trade-Ins

By The Wall Street Journal

Auto dealers are starting to ramp up advertising built around the government's "cash for clunkers" program, even as they are growing more concerned that the incentives won't provide enough of a spark to revive U.S. auto sales.

Restrictions on eligibility combined with delays in launching the program -- which promises rebates as high as $4,500 -- have quashed hopes that the U.S. will see the same sort of car-shopping craze experienced by countries such as Germany and Brazil that implemented similar plans.

Cash-for-clunkers, formally known as the Car Allowance Rebate System, will provide about $1 billion in federal funds as incentive money. Eligible owners of gas guzzlers will receive a credit if they turn them in and buy or lease a new, more fuel-efficient vehicle.

The program was approved June 1, but final details on eligibility have yet to be released. That information is expected "on or around" July 24, according to the program's Web site, www.cars.gov.

Dealers are gearing up with online and newspaper ads inviting potential buyers to stop by and see if they are eligible. Some dealers have set up special Web sites. But the lag between passage of the measure by Congress last month and implementation has cooled consumer sentiment, dealers across the country say.

Preliminary rules saying clunkers must be less than 25 years old and get 18 miles per gallon or less in combined city/highway mileage also have hurt.

"We like the idea behind the program; however, the eligibility could be a little too strict and may keep some of my people away," said Alan Helfman, vice president of Houston's River Oaks Chrysler-Jeep.

The program might boost sales by 175,000 vehicles in 2009, said IHS Global Insight analyst Rebecca Lindland. That isn't much help given the hole the industry is in. U.S. auto sales ran at an annualized rate of 9.69 million vehicles in the first six months of the year, down from 13.69 million in the same months of 2008.

"And these will be sales that are pulled ahead and not new demand," Ms. Lindland said. "We don't see that many people willing to trade in to take on new debt."

Ford Motor Co. and General Motors Co. have rolled out Web sites dedicated to answering questions. Ford has also established a 1-800 hotline. "We have seen 300,000 people go to the Ford.com site to check their eligibility," said Jim Farley, Ford's marketing chief. "We are seeing customers at least coming in and talking to dealers about it."

Hyundai Motor Corp. dealers are already starting to offer discounts based on the expected rebates, funded by loans from Hyundai that cover the difference until the program officially starts.

The National Automobile Dealers Association is encouraging dealers not to make any offers until the final details of the program are known so they don't put their own money at risk.

The clunkers program will run through Nov. 1 or until the funds are exhausted. A similar program in Germany drew more than one million applications for vouchers. That program, at $6.5 billion, is larger than the U.S. version.