The Google says the average price of new cars sold is $28,400.
While the average price of the new car might be $20000, the sizable majority of that goes to the manufacturer, not the dealer, on 160 new cars, he's probably looking at $80-320K. While subsidising the government until they get their paperwork together to reimburse him.
So why does the dealer receive a small fraction of the total sales price yet somehow he has to shoulder the total $4500 reduced from that price? If the dealer is only making $750 per car, the "burden" of subsidisng the government is only costing him the equivalent 3.75% of the $4500 ... or $168.75.
The dealer says he's carrying a $1M on the 160 clunkers he's taken in ... but that cost would seem to be (160 x $168.75) appox. $27,000. The dealer seems to be subsidizing the government for that amount as he waits for payment (160 x$4500 = $720,000) while complaining to the media he exaggerates his "burden" 370 times the real amount out of pocket. Once he gets that big check from the government, how long do you think he'll hold on to that money before he starts paying out to the manufacturer?
So why does the dealer receive a small fraction of the total sales price yet somehow he has to shoulder the total $4500 reduced from that price?
The dealer isn't the manufacturer. He pays the manufacturer the dealer cost of the car, then sells it to us for retail. That retail to cost difference is vanishingly small on small cars - dealers make most of their profits on the finance deals (big rule of car buying - get the deal, THEN work out the finance, if you cannot come to an arrangement with the dealership for finance, check with your bank directly).
The same is true on manufacturer rebates. You buy the car with the rebate discounting the price, the dealer fills out the paperwork and gets the manufacturer rebate after the fact. So in that case the dealer is still subsidising the sale, but he's going to get the rebate from the manufacturer very quickly (because they're set up to work that way).
The problem with C4C is the government agency that is dealing with the rebates isn't set up for it, they're understaffed and now expected to do a whole **** load of extra work on top of their usual jobs. The program has been so successful that they're swamped and they really have no way to meet the "within 10 days" clause of the program. Sure dealers will get their money eventually... but I can guess they're not happy about how long it's taking. And the deal is between the car dealers and government - the manufacturer is not in the loop here, and is happy because they already got their money when they delivered the car to the dealer originally
Edited by Llewelyn (08/20/0908:03 AM)
_________________________ I used to think it was terrible that life was unfair. Then I thought what if life were fair and all of the terrible things that happen came because we really deserved them? Now I take comfort in the general unfairness and hostility of the universe.
And the deal is between the car dealers and government - the manufacturer is not in the loop here, and is happy because they already got their money when they delivered the car to the dealer originally
I didn't know that ... that fact makes the complaining dealers look like an even bigger putz. Selling 500,000 new cars in 3 weeks through this program is a bad thing? If the dealers had pre-paid the manufacturer and their investment was sitting on the lot unsold because of a bad economy, selling and claiming $1.8B from the government is worse than nothing?
When the dealer signs the contract and becomes a partner with the government in the C4C program they do it because it's a sweet deal and profitable alternative to shutting their doors for good.
The government readily admitted they underestimated the demand when the program begin. Dealers agreed to specific terms and detailed regulation in accepting a clunker to make a claim. You think car dealers might have tried to stretch those rules a bit to make a $4500 claim? You think it's the government's responsibility to accurately verify each claim before our tax dollars are paid out to the dealers? 500,000 claims in 3 weeks tells me the dealers like this program as much as the consumers.
Just heard on NPR this AM that there is going to be a Cash 4 Clunkers-like program for major appliances starting near the end of the year. Up to a $200 tax credit or gov't rebate for the purchase of new energy-efficient refrigerators, washers, etc. No trade-ins required, of course. Sounds like a good deal, and should stimulate some more retail sales. Our oven and fridge are ancient and need to be replaced soon, so that's an incentive to do it this year.l
There are other cost for the dealer such as getting rid of the clunkers , since the scrap yard only makes a 100 bucks for the metal , their not going to spend the money to pick them up from the dealer . So the dealer either has to shuttle the clunkers to the scrap yard or load them on trucks which cost money
I bet thats included in that 1 million their talking about ?
Not sure about NY but here if you junk a car you MUST turn in the license plate back to DMV - thats gotta cost some money too .
I was surprised to learn that in Ohio, you don't return plates to the BMV if you take a car off the road. When my wife's Sable was totaled last year, I took the plates to the registry and they said just bend 'em in half and throw 'em in the trash. Seems like an invitation to fraud, but that's the policy. Go figure.
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