Friday, August 7, 2009
Car dealers mistrustful of Uncle Sam: Rebates wanted before scrapping
The popularity of the cash-for-clunkers program has gotten many gas-guzzlers off the streets, but not many have made it into junk yards.
Despite the sale of nearly 250,000 new vehicles since the Car Allowance Rebate System, or CARS, debuted July 24, many old cars remain on dealers’ lots. Dealers are reluctant to junk the cars until they receive the federal government’s promised rebate.
“You don’t want to send them (away) and disable them until you’ve been paid,” said Howard Danoff, sales manager at Shaker’s Lincoln, Mercury, Kia in Watertown.
Under the program, Americans who buy cars that get 10 mpg more than their current cars can receive a $4,500 dis¬count, if their old cars aver¬aged less than 18 miles per gallon of gasoline. Car dealerships then apply for a government rebate. But many car dealers, Danoff said, are reluctant to disable a potentially valuable used car until they receive the government check. Until then, the clunkers sit in the dealers’ lots.
Shaker’s has 27 trade-ins, mostly SUVs, being stored in a lot behind the dealership normally used for employee parking. The dealership has completed the arduous task of filing the necessary paperwork for those rebates.
Once dealers receive the re¬bate, they have seven days to destroy the clunker’s engine. The dealers employ a lethal injection of sodium silicate, or liquid glass, that eats away at the internal engine parts, rendering the engine inoperable.
Dealers then contact an authorized recycling company, which has 180 days to strip any wanted parts and to then crush or shred the vehicle.
Tom’s Foreign Auto Parts in Waterbury is one of these authorized recycling companies. Owner Jim Eitvydas said his shop has received eight clunkers from the program, but he expects he’ll get many more.
“All of (the dealers) are very, very nervous about getting paid from the government,” Eitvydas said. “Nobody’s got¬ten paid yet.”
While extra cars coming through his shop mean more parts to be sold, Eitvydas isn’t yet sure if the cash-for-clunkers program is going to be beneficial to his company.
He can add some of the parts, including headlights, taillights, grills and car computers, to his 30,000-item eBay inventory, which currently includes items like an Audi A4 side view mirror for $99.99, a Mazda 3 steering wheel for $129.99 and a Lexus GS350 headlight for $1,199.99.
But Eitvydas can’t sell the engines, which are the most ex¬pensive items on the used parts market. Some sell for more than $3,000, depending on the make.
It is also more expensive and difficult to dismantle a clunker than a normal scrap vehicle, because the sodium silicate must be disposed of separately from other fluids to avoid contamination.
Not to mention the paper¬work.
CARS has numerous guidelines to safeguard against fraud. The dealer must label three sides of the vehicle with the word “CARS” or “clunker” to avoid any confusion and must report the Vehicle Identification Number (VIN) to the government upon making the deal. After the recycling company receives the clunker, it has seven days to report the VIN.
Eitvydas said the 134-page law was extremely confusing to dealers and recyclers alike, but important for everyone to grasp.
“If the cars aren’t reported properly the recycler could get big fines (of up to $15,000), and if the new car dealer doesn’t re¬port it properly they can be asked to give the money back. There’s a lot of responsibility on both ends,” Eitvydas said.
Ultimately, the result of CARS is tons of pounds of scrap metal in the hands of recycling companies, but how the pulverizing of so much metal will affect the price of steel is uncertain.
At this time last year, steel was priced at $550 per ton, but dropped to about $125 per ton in September and October. Currently, steel is priced at $230 per ton.
Bruce Savage, vice president of communications for the Institute of Scrap Recycling Industries, said the only way recycling companies will benefit from the program is if it prompts Americans to buy new cars, thereby prompting automakers to build more cars.
“Their making more cars would drive up demand for materials, which would drive up the price (of steel),” Savage said.
Originally appeared 8/6/2009 on pages 1A and 5A of the Republican-American©.