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AAIA Predicts Consumer Backlash on 'Cash for Clunkers'

Meanwhile, dealerships report up tick in business due to CARS program.

While new car dealerships begin to ramp up advertising to attract consumers to the showroom using the "Cash for Clunkers" program, which officially starts July 24, the Automotive Aftermarket Industry Association (AAIA) said it anticipates a consumer backlash once reality replaces the hype.

"It wouldn't surprise me if there is a consumer backlash once car owners realize that 'Cash for Clunkers' is nothing more than a clever slogan for a program to spend $1 billion of our tax dollars to fund a government subsidized vehicle trade-in to help new car dealers sell cars," said Kathleen Schmatz, AAIA president and CEO. "Consumers will soon learn that they are simply trading in their vehicle and will still have to jump through all of the hoops to qualify for and purchase a new vehicle."

The much-heralded fuel efficiency and environmental benefits of purchasing a new vehicle could easily be achieved through better maintenance of an existing vehicle or trading up to a newer used vehicle, according to AAIA. Any savings from improved miles per gallon will be lost from the costs involved in destroying and disposing of the "clunkers."

AAIA has strongly opposed "Cash for Clunkers," which the association believes prematurely destroys vehicles and their valuable parts and components. "Destroying vehicles with many more years of life denies consumers more affordable used vehicles and pulls vehicles from the aftermarket supply chain," Schmatz said.

The Consumer Allowance Rebate System (CARS), the official name for "Cash for Clunkers" offers vouchers up to $4,500 to new car dealerships for consumers who trade-in their vehicle for a new, more fuel-efficient vehicle.

At the same time, a new report out today says that three out of ten dealers report having made a sale involving a "Cash for Clunkers" voucher even though the rules about how the program will be administered won't be issued until tomorrow. However, the clarity those rules will provide is still needed: Nearly 90 percent of dealers said consumers had either low or moderate awareness of the program, and two thirds (66 percent) said information given to dealers up until this point is "insufficient."

The survey, conducted by Dealix, a division of Cobalt, and a leading provider of automotive sales leads for dealers, dealer groups and manufacturers, shows that dealers remain hopeful that the CARS (Car Allowance Rebate System) bill signed into law by President Obama on June 24, will spur sagging new car sales. While the survey results document interest among consumers, dealers were vocal about their need for additional information.

In addition to the 34 percent of respondents who said their dealership had made a sale involving a to-be issued voucher, dealers reported that the program has increased shopping activity and that auto buyer interest in the program is strong. Sixty-eight percent of respondents reported an increase in traffic to their showrooms, and 65 percent reported an increase in interest online.