Cash For Clunkers” was a big success for many new car dealers across the United States. Sales numbers were up along with gross profits and overall dealership profitability. It made many dealers remember what it was like to be busy with viable traffic and put deals together.The down side of the program is yet to be seen. Dealers have been funded very slowly thus far from the program and as a result, cash flow issues have begun. The average “Clunker” rebate was $4,000 and dealers have been waiting up to a month and sometimes longer get receive their money. Cash For Cars Sydney
Allow me to set the stage… Most every new car dealer has a “Floor Plan”. A “Floor Plan” is the amount of money the dealer borrows from the bank to purchase their inventory. When they sell a car, they take the proceeds from the deal and pay the car off immediately. Let’s assume you are a new car dealer and you typically sell 100 news cars per month. Let’s also assume that the program created 40 additional sales for a total of 140 new car deals. If the dealer made $1,500 for each of the additional sales equaling $60,000, but has been waiting a month to receive their (40 X $4,000) $160,000 from the program, that creates a negative cash flow of $100,000. For dealers that have been struggling for the past year, this can be a back breaker. Another issue that has been created from Cash For Clunkers is the heavy pull back of sales for the used car dealers. These dealers were, for the past year, seeing healthy increases in gross profits and sales volume. Unfortunately, the program that was designed to stimulate the economy, created a hardship for the used car dealers. This market will come back quickly, but they were injured during the program.