'Clunker' Rebates Stir Car Buyers

By ALEX P. KELLOGG and JOSH MITCHELL

The first weekend of "cash for clunkers" rebates boosted new-vehicle sales, despite minor snags and worries the program might not have a long-lasting effect.

On Monday, Daryl Little turned in his dusty 1995 Chevrolet Silverado pickup truck with 362,000 miles at Cook Chevrolet Pontiac Buick in Vassar, Mich., and drove off with a new, 2009 Silverado that qualified for the rebates because it gets much better gas mileage than his old one.

Mr. Little said he would have been lucky to get $1,200 for his old truck and wouldn't have had the money to buy the new one without the $4,500 clunker rebate. "I thought I'll never get a better deal," the construction-company manager said.

A sign advertises the government's cash-for-clunkers sales incentive at Tropical Chrysler Jeep in Miami Shores, Fla. Dealers reported strong sales over the weekend by buyers seeking the up to $4,500 allowances.

It is unclear, however, whether the $1 billion program -- officially the Cash Allowance Rebate System -- is going to boost sales over time or merely pull forward purchases by customers planning to buy new vehicles in the weeks or months ahead. The program is due to expire Nov 1.

"I don't think this is permanent by any means," said Emir Abinion, a former Ford dealer who owns two Volkswagen dealerships in suburban Chicago. "It's just a shot in the arm...I don't know one dealer who would think this will be a catalyst for sales."

George Fowler, a Pontiac-Buick-GMC dealer in Dearborn, Mich., said he has made seven sales so far through the program. More than 30 people have come in hoping to buy, but most didn't meet the qualifications. Most of those participating, he said, would likely have bought a new vehicle in the coming months regardless of the discount.

"These are people who would have been in the market anyway, and they have a trade that was worth $1,500 and now is worth $4,500," he said.

Under the program, new-car buyers can get $3,500 or $4,500 in rebates when they trade in older vehicles for more fuel-efficient models. The program was passed by Congress and signed into law by President Barack Obama in June, but the rules and details were only laid out Friday by the National Highway Traffic Safety Administration.

The White House is counting on the rebates to spur vehicle sales at a time when auto makers have been hit particularly hard by the recession. U.S. auto sales are on pace to total about 10 million vehicles, down from about 13 million in 2008 and 16 million in 2007. Boosting new-vehicle sales would also help the administration's efforts to turn around General Motors Co. and Chrysler Group LLC.

Nearly 16,000 auto dealers signed up to participate in the program, and a government hotline has handled more than 45,000 calls from people seeking information, a Transportation Department spokeswoman said. A Web site for the program registered 1.5 million hits since Friday.

A few glitches have appeared. Some dealers said junkyards in their area are ill-prepared to handle the influx of older cars expected to be scrapped. Others said the 136-page instruction manual provided by the government is confusing. Some consumers have been disappointed their cars don't qualify. The NHTSA Web site where dealers must register to participate crashed for a time on Friday due to heavy use.

But the program is bringing car buyers into showrooms, said dealers. At Paragon Honda in Queens, N.Y., General Manager Brian Benstock said he started working out clunker trade-ins before the program's official launch and has sold 50 cars this month, including eight over the weekend.

Few older Hondas qualify for the program given their fuel-efficiency, but it has been a bonus for
foreign auto makers, he said. Many of the vehicles turned in are GM and Ford pickups, he said. "This has all been a market-share gain for us," Mr. Benstock said.

Steve Cook, owner of the Michigan dealership where Mr. Little bought his new Silverado, said the past weekend was the busiest he has had in months. "I'm going to sell in a week what I sold in a month."

Mike Adamson, who owns three franchises around Rochester, Minn., has seen the clunkers program triple overall sales at his Lincoln Mercury, Hyundai and Chrysler Dodge dealerships. On Monday, his dealerships had sold 50 vehicles that were awaiting final government approvals.
"It's way more than I could have anticipated," said Mr. Adamson.—Sharon Terlep, Matthew Dolan and Jeff Bennett contributed to this article.

Write to Josh Mitchell at joshua.mitchell@dowjones.com Printed in The Wall Street Journal, page B2