Cash for clunkers putting small businessmen out of business
While Honda, Toyota and GM (Government Motors) have enjoyed the increased sales created by the “cash for clunkers” program, some small businessmen may be closing their doors as a result of the government give-away. Our local newspaper recently ran a story on how taking working automobiles off the road permanantly is killing used car dealers.
While the Clunkers program helped push sales of new cars in July to the highest level in nearly a year, sales of used cars have taken a beating.
“We’re struggling and a lot of us small guys are going out of business,” said James Dameron, sales and finance manager at Chase Motors in suburban Richmond, where sales are down about 30 percent.
About 40 million used vehicles are sold a year, four times the number of new cars, said Keith Whann, an industry expert and chief executive of Columbus Fair Auto Auction in Columbus, Ohio. About a third of the used sales come from independent dealers
While the very people who pushed “cash for clunkers” like to claim that they’re all for the little guy, many of the used car dealerships being put out of business are the epitomy of small business.
Mom and Pop dealers typically sell just 20 to 25 vehicles a month and keep 40 to 45 vehicles on their lots, a fraction of the inventory for bigger dealerships, Whann said. So when the owner of a 1995 Ford Explorer opts for a new car, and the old SUV goes away forever, the repercussions are felt quickly. Especially for a majority of these dealers who have fewer than six employees.
As the supply of used cars dwindles, it means higher prices.
“The guy looking for a cheap used car is having a helluva hard time now,” said Greg Signore, 50, co-owner of Elm Auto Sales in Kearny, N.J. “This program is absolutely increasing the cost of the clunkers left on the market.”
He says he’s not getting as many customers with modest income looking for basic transportation.
“What about all these people who need the $3,500 cars? Are they going to ride the bus for the rest of their life?” said Mike Salarze, manager of Majestic Motors in Baltimore.
