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Dealers Suffering as Cash for Clunkers Legislation Languishes

By KBB.com Editors on May 29, 2009 2:41 PM
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Legislation that would offer significant cash credits to people who replaced their existing older vehicles with new, more fuel-efficient models has been a congressional work in process since the Obama Administration took over in January. At the moment, the latest incarnation being debated as part of the American Clean Energy and Security Act would see buyers qualify for vouchers worth between $3,500 and $4,500 that could be applied against the purchase of both passenger cars and light trucks/SUVs, regardless of their country of origin. Unfortunately for dealers, this enticing carrot-to-be is creating a de facto waiting game that's exacerbating the worst sales slump since the Great Depression and further threatening their existence.

According to Russ Darrow, who chairs the American International Automobile Dealers Association, the situation needs to be addressed quickly and decisively to prevent even further erosion of an industry that has seen volume plummet by nearly 40 percent this year. A number of analysts believe that passage of this bill could help generate up to one million additional new-vehicle sales. They cite the impact of a similar type of Cash-for-Clunkers law recently enacted in Germany that bumped sales by 40 percent in March and 19 percent in April. Darrow says the AIADA has been working with U.S. legislators to expedite the approval process, which he hopes can be moved into done-deal mode soon after Congress reconvenes early next month.

While admitting no final product will be perfect, Darrow sees four elements as key to ensuring whatever legislation emerges has the greatest overall impact. Beyond being simple enough for everyone to understand and as broad-based as possible with respect to makes and models covered, he contends that it must streamline the flow of government funds to the already cash-strapped dealers. Last and perhaps most critical, Darrow feels the program needs to establish relatively short-term time limits that can immediately drive buyers back into the showrooms and effectively jump start the recovery process.

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