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'Clunkers' program keeps gas guzzlers on road
Associated Press

The most common deals under the government's $3 billion Cash for Clunkers program, aimed at putting more fuel-efficient cars on the road, replaced old Ford or Chevrolet pickups with new ones that got only marginally better gas mileage

 

Associated Press

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Published: 11/28/2009 10:19 PM

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SIOUX FALLS, S.D. -- Across America, people bought Toyota Corollas and Honda Civics more than any other vehicles during last summer's popular Cash for Clunkers program.

In South Dakota, they bought pickups.

The clunkers program was designed to jump-start the nation's economy and take gas-guzzling vehicles off the road.

But an analysis of government data by the Argus Leader shows that in South Dakota, the program might have served as a gift from taxpayers to car buyers and dealerships.

The program's two best-selling vehicles in the state were the Chevy Silverado and Ford F150, two four-wheel drive pickup trucks that average less than 20 miles per gallon of gas.

And while the data show that some South Dakotans did not use the program to significantly improve their gas mileage, analysts also question other aspects of Cash for Clunkers -- including whether it truly was needed to spur auto sales, and the logic of destroying some vehicles that remained perfectly useful.

National average was 24.9 mpg but only 23.5 on buys in S.D.

Nationwide, more than 670,000 new vehicles with an average gas mileage rating of 24.9 miles per gallon were bought under the Cash for Clunkers program, according to government data.

In South Dakota, where almost half of the vehicles purchased were trucks, sport utility vehicles or vans, that figure was only 23.5 miles per gallon.

"South Dakota has always been kind of high in truck volume," said Mike Larsen, sales manager at the Vern Eide Honda dealership in Sioux Falls.

The Argus Leader analysis of clunker transactions showed that:

Nationally, 41 percent of the new vehicles bought were trucks, vans or SUVs. In South Dakota, they made up 45 percent of purchases. About 60 percent of those vehicles average less than 20 mpg.

According to data compiled by Wards Auto, the average gas mileage of a new car bought in August this year was 23 miles per gallon. Forty-two percent of the clunker purchases in South Dakota -- worth $4,233,500 in rebates -- fell below that average.

More than 400 consumers in the state bought new cars that get less than 4 mpg better mileage than the clunker they traded in.

Nationally, the two most popular cars bought under clunkers were Corollas and Civics, which average 29 miles a gallon for the regular models.

By contrast, the most popular versions of the Silverado and F150 trucks get 16 and 15 mpg. About 90 percent of the customers who bought those trucks improved the mileage from their trade-in by 3 mpg or less.

Analysts say auto sales uptick might have been inevitable

Under the clunkers program, customers received government-backed rebates of $3,500 or $4,500, depending on factors such as vehicle size and gas mileage. There were no income guidelines.

The program was a good deal for buyers, but their good fortune came at a $3 billion cost to taxpayers, analysts say.

Ernie Goss, a regional economist at Creighton University, and Jeremy Anwyl, CEO of Edmunds.com, an auto shopping Web site, said they don't think clunkers was worth the price.

According to an Edmunds.com analysis, the majority of auto sales that were conducted under the program would have taken place anyway at some time in the last half of 2009.

The company estimates that only 125,000 of the program's vehicle sales would not have happened without Cash for Clunkers.

"Frankly if you are a taxpayer, I'm not sure what it really accomplished," Anwyl said.

'Our children and grandchildren will all be paying,' Thune says

Sen. John Thune, R-S.D., voted against a supplemental $2 billion in funding for the program in August.

"Cash for Clunkers did little to spur the economy and while those who participated in the program may have benefited from it, our children and grandchildren will all be paying for it for generations to come," Thune said.

Rep. Stephanie Herseth Sandlin, D-S.D., also voted against supplemental funding for clunkers.

Democratic Sen. Tim Johnson, meanwhile, voted for the added cash infusion and stands by Cash for Clunkers.

"This program was an effective but temporary incentive to spur new vehicle sales and boost manufacturing and economic output," Johnson said in an e-mail statement.

Billion: 'When it's all said and done, it was a success'

Billion Automotive dealerships in South Dakota accounted for more than one-third of the rebates in the state with a total of $3.62 million in sales. The dealerships sold 857 new vehicles through the program, according to federal data.

David R. Billion said he thinks the program helped stimulate the economy and took unsafe, polluting clunkers off the road.

"When it's all said and done, it was a success," Billion said.

Billion's company had a 15 percent to 20 percent boost in business during the program, and he contributes that success to marketing and having a good selection. Last fall, when the market looked bleak, Billion decided to stick with the previous year's business plan and stay with a large inventory.

"We were very optimistic. We feel as though the best way to sell cars is to have them and market them," Billion said.

Even with the Cash for Clunkers success, Billion said it accounted for only 20 percent to 30 percent of his business.

Fewer new cars left on lots after program, auto analyst says

While clunkers cleared out a lot of inventory for many dealerships, that was not a good thing for everyone.

Inventory was low on many lots before the program began because manufacturers such as GM and Chrysler shut down temporarily because of bankruptcy filings, Anwyl said. The rush of clunker purchases created instability in the industry and left dealerships with fewer new cars on the lot, he said.

"Every other consumer ended up paying a lot more for the new vehicle they bought because of the shortage," Anwyl said.

Used car dealerships also suffered from the program because inventory shortages.

And clunkers increased the price for used cars, Goss said.

Program required demolition of old cars with many miles left

Another aspect of the program that has drawn criticism is the government requirement that all clunkers must be crushed.

"You destroyed cars that had useful miles on them, which hurts lower-income individuals," Goss said.

Larsen, from the Vern Eide Honda dealership, said that about a quarter of the clunkers traded in at his dealership were road worthy and about 10 percent were nice, clean vehicles.

"It's a shame that they had to be destroyed," he said.

No matter the condition of the vehicle traded in, the government required the engine to be disabled before it left the dealership.

Nordstrom's Auto Recycling near Garretson is responsible for crushing about 1,700 clunkers and still is busy completing the task.

Most of the vehicles brought in didn't fit the typical clunker definition, said Benji Steffes, assistant manager at Nordstrom's.

"There are a number of these that in the government's eyes are considered clunkers, but in an auto recycler's eyes, I wouldn't deem them as clunkers," Steffes said.

Some vehicles slated for crushing would make a car enthusiast cringe.

For example, Nordstrom's crush list includes a 1987 Mustang with a 5.0 liter engine, a 2002 Lincoln Navigator and a 1989 Mustang convertible.

"That was a tough one to see go," Steffes said.

Russell Boynton of Sioux Falls was one South Dakotan who used the clunkers program to significantly better his gas mileage. He traded his 1997 Jeep Grand Cherokee for a new Ford Focus and saw his gas mileage go from 14 mpg to 28 mpg. And he got $4,500 for a car that he described as worthless and breaking down.

"You really can't beat it," Boynton said.

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