For weeks I have been contemplating the “Cash for Clunkers” program, and wish I would have posted some of my thoughts, as many have now come true. Here are a few of those thoughts.
My greatest concern has been the “Cash Flow” of the program. Many dealers are struggling with their current cash positions and if this program does not pay in a timely manner, cash positions will only get worse. I have heard of but a few dealers being paid, but I understand that the money should start flowing soon. Let’s hope it does, because if a dealership does well with the program, but does not get paid promptly, it could spell disaster.
Another problem of course is getting these folks financed. In many cases there is a reason why these people are driving these cars, THAT’S ALL THEY CAN AFFORD, or they don’t have the credit to qualify for any type of financing. These people have had sources in the past (Sub Prime), but many of those have dried up and it could be some time before that market rebounds to its previous levels (if it ever will).
One item I hadn’t thought about, but have heard about it since is the CSI issue. The C4C system is not CSI friendly, and as a result, CSI will undoubtedly suffer, regardless of how the deal(s) go down. I see little or no remedy for this problem.
Speaking of the Cash for Clunkers program (application, qualification, approval etc.), the program itself is rather cumbersome. Many dealers have complained about not being able to get signed up, the inability to determine unit eligibility and qualifying customers. Most of us in this industry are familiar with many paged, complicated incentive programs, but this may be the champion.
The bottom line however is this; any program that helps this industry “SELL UNITS” is certainly a welcome relief. We need to take enjoy this while we can. But has anyone considered what happens AFTER the program this program is over?
Rebates, 0 % Financing and the other numerous program we’re all familiar with always come to an end, and when that happened, the bulging showrooms and busy lots empty out. Additionally, certain model inventories are depleted, the used market is spinning, sales staffs are worked to the point of exhaustion and NO ONE knows what the next round will bring.
One thing is for sure, IT WILL END, and when that happens everyone will be transported back to “business the way is was before”, whatever that might be. A couple words of caution.
Be careful in replenishing your new inventories. This artificial sales boom may not continue, and if it doesn’t, you don’t want to be stuck with TOO much inventory based on artificially inflated sales. (The factories may not have the same thoughts here)
Be aware of the Used Vehicle Market and its swings. The used market was already in a volatile state, and this program will only add to the volatility. When you take that many units out of circulation, it HAS to have an effect.
MOST IMPORTANTLY, do not forget what your dealerships SHOULD be doing in more “NORMAL” times. Your sales staff has been “retrained” and your processes have been modified by the C4C program. The BAD HABITS your staff has LEARNED during C4C will be ineffective for future sales, once the program ceases. Be ready, start retraining NOW, incorporate your previous sales steps and processes into the current program so your transformation back to reality will be less severe. Make sure your dealership is properly re-structured to succeed, but DO IT NOW, as this will dictate ALL your future successes.