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I was at the Rock Along Productions Meetup Mixer on Saturday night and spent a decent portion of the evening talking with someone who works at a local Toyota dealership. He was telling me that although the Cash for Clunkers program is spurring consumers to trade in old cars and helping car buyers, it is in fact causing most dealers to lose money.
The dealership he works for lost over $60,000 last month alone and many other dealerships are in the same boat. The reason is simple, even with the additional influx of funds there is only enough money to rebate every dealership in the country 5 trade-ins, yet most of the big dealerships are applying for fifteen or twenty rebates a day. This first come first serve rebate processing means that the small dealerships with less staff and less volume are not able to get reimbursed.
To make matters worse is if the dealerships do not get the rebate by the time the older car gets sent to salvage, the dealer has to write off the loss and cannot get the rebate after the car has already been salvaged. I found this information to be quite interested and it changed my point of view on the program in several other ways.
For instance, trading an older less fuel efficient car in for a new fuel efficient car isn’t as beneficial as you think. The money and environmental damage caused by salvaging an old car and disposing of it is far more detrimental to the environment than keeping it and driving a less fuel efficient car around. So though it may save the car buyer gas money, it is actually worse for the environment to dispose of all the older cars.