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Auto dealers cash in on clunkers Local sales rise 4 percent during July and August

Cash for Clunkers was a bureaucratic burden for many local auto dealers, but it provided a dearly needed summer sales boost and helped stop a year-long sales slide.

Area dealers' sales rose 10 percent in August, when the government incentive program was in full force, according to data from the Niagara Frontier Automobile Dealers Association.

Combined new-vehicle sales for July -- the program was formally launched late that month -- and August were up 4 percent from the previous year, the NFADA said.

Not all of those sales were tied to the government incentive program. But dealers credit Cash for Clunkers with driving showroom traffic and drawing attention even to vehicles not eligible for the program due to their fuel economy ratings.

The NFADA reported combined July and August new-vehicle sales of 10,150, compared with 9,765 a year ago. The figures for both years do not include sales heavyweight Chevrolet, which does not publicly disclose its local monthly figures. And separate figures for "clunkers" deals were not available.

From January through June, before Cash for Clunkers started, new-vehicle sales at Buffalo area dealers were down 27 percent from the same period in 2008, according to NFADA. Through August, the decrease was 19 percent.

While the federal government's program boosted sales, it also created headaches for dealers. They ran into problems electronically filing the paperwork to obtain rebates of $4,500 or $3,500 per deal. They also faced delays in getting paid, prompting some to quit the program early.

The U.S. government said last week that it had paid about 97 percent of the $2.7 billion worth of cash for clunkers deals that were made.

During July, Buffalo-area new-vehicle sales declined about 3 percent from a year earlier. Cash for Clunkers did not officially get under way until late July, so the figure only partially reflected the program's impact.

In August, local new vehicle sales shot up 10 percent from a year earlier to 5,520, easily the best monthly total this year. Cash for Clunkers ended Aug. 24.

Nationally, new car and truck sales in August rose 1 percent from the year before, as a drop in truck sales virtually offset an increase in car sales, according to Automotive News data.

Towne Automotive Group made 366 "clunker" deals at its area dealerships and has been paid for nearly all of them, said Tony Daily, general manager.

"It was a good thing because it cleared out a lot of our (2009 models) and made room for our 2010 models," he said.

Daily said he felt the program was especially beneficial to consumers in a region like Buffalo Niagara, where, because of the harsh winter weather, vehicles need to be replaced more often than in places with milder climates.

Of the 34 auto brands for which full year-over-year NFADA results were available, 16 reported increases in their combined July and August sales from a year ago and one was unchanged. Sales declined for the other 17.

To qualify for the incentives, a customer's trade-in and new-vehicle choice had to satisfy fuel-economy criteria. That meant some manufacturers' products, like small, fuel-efficient cars, were better suited than others to capitalize on the program.

Among the brands that publicly disclosed their local sales figures, Ford racked up the most new-vehicle sales in July and August, with 1,976, followed by Toyota's 1,871. Ford's two-month total was up 17 percent from 2008, while Toyota's increased 20 percent.

Cash for Clunkers proved more popular than the federal government expected. When the initial $1 billion allocation nearly ran out in the first official week of the program, Congress poured in an additional $2 billion.

Critics of the program have called it a waste of taxpayer dollars, saying the fuel efficiency gains resulting from the deals were minimal compared with the $3 billion price tag.

One question that hung over Cash for Clunkers was whether auto sales would revert to a slump when the program ended. The answer for September will come soon, with national sales figures due out in a few days.

At Towne, showroom traffic is "a little bit off" this month, but at about the level the dealer group expected after Cash for Clunkers ended, Daily said.

True Car, a new-car pricing research Web site, projects that national new-vehicle sales this month will fall 7 percent from September 2008 and drop 29 percent from "clunkers"-driven August.

Jesse Toprak, vice president of industry trends, called the results a "good news-bad news" scenario.

The bad news is that sales will be down dramatically from August, as expected, Toprak said. But the good news is that the decline initially looked like it would be even worse, perhaps a drop of 40 percent or more, before the picture began to brighten, he said.

Improvement in some economic factors, such as the stock market, has created a more favorable buying climate than existed before the clunkers program was launched, he said.

And manufacturers' incentives have helped offset the impact of the end of the clunkers program, Toprak said. A number of automakers sought to capitalize on the interest in new vehicles sparked by the federal program.

"It is much easier and cheaper for automakers to ride on the coattails of an existing momentum rather than to create a new one," he said.

e-mail: mglynn@buffnews.com

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