The Governments latest efforts to boost an already weary economy has been the introduction of the Cash for clunker program. After only a few days there was panic in the showrooms, when the funds of one billion dollars had been virtually depletedwithout one single payment to any of the dealers that had utilized the program. This created a shock wave of panic throughout the business communities and subsequently Auto dealers were left wondering if they had everything necessary to get paid and in some States, like California, many of the contracts had to be re signed with the correct taxable information reflected on the contract.

 As a car dealer myself, it was a welcome sight to see the passing of an additional two billion dollars, but the frustration among many was that the major benefactors of this program were the import dealers. Honda and Toyota sales are going through record sales right now, with the big three automakers, such as General Motors and Chrysler having only seen marginal increases. The program should have been thought out a little more. Had the government put the clunker program in effect for US automakers and more specifically, GM and Chrysler, who they bailed out earlier in the year, perhaps they could have seen some returns on their (the Government) investment.

the other problem this has created is an increase in the value of the used car market and  the decline in used car sales as a result. Independent automobile dealers are struggling to make a profit through this clunker program and used cars are getting hard to find at a reasonable price.

Another short term problem is new car inventories. General Motors had an 84 day supply of vehicles in June of this year, but with the clunker program, that is now down to a 62 day supply. This will cause the manufacturers the need to build cars, but with the strained relationships with the vendors who provide auto parts, as a result of the bankruptcies, it is going to be difficult to get the much needed parts to build them.

Adding fuel to this fire is the banking industry. Even though the credit guidelines have been relaxed a little, it is still very difficult for the average car buyer to get financing at a reasonable rate to afford the purchase of an automobile. This could in effect, create a major slow down of sales in the fall months to come. One suggestion that I have heard frequently and agree with, is the need to have a return of incentivized leasing on a short term basis.

This leasing program would put more new vehicles on the road, provide for an increase in used car inventories over a five year period and allow for greater revenues for state and local communities. With more sales, comes the need for more jobs and with more jobs the economy stabilizes.