AAIA Predicts Consumer Backlash on 'Cash for Clunkers' - Engine Builder Magazine

AAIA Predicts Consumer Backlash on ‘Cash for Clunkers’

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

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

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

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.

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