Bridging The Gap
Dealer Insight from Edmunds.com

Have you seized the moment? Are you capitalizing on the opportunity? Now a few weeks into the Cash for Clunkers program, you should be witnessing renewed consumer interest, increased foot traffic, and ultimately, an increase in sales-if you've been following the advice I laid out in my last newsletter, that is.

For whatever reason, if you weren't able to implement any of my tips, and your showroom floor still longs for the hustle and bustle of days gone by, never fear. There is STILL TIME to take simple, effective measures that will help your dealership achieve its sales goals and let you leverage the unique opportunity to carpe clunker.

This issue of the Edmunds Dealer newsletter is dedicated to pulling it all together for you. Listen up. Here we go!

BREAKING NEWS!

Dealers can wait until they've received cash back from the government before they kill vehicle engines

Dealers have been concerned, and salvage yards also, with the procedures in "clunking" a car, paperwork and applicable charges. Dealers have "hair" on deals sometimes, from factory incentives to the financing of the deal from banks. It is a concern that dealers will not be funded for a car they've "clunked" either because there is a problem with the paperwork or that the program will run out of funds. Waiting to "clunk" a vehicle until it is funded makes sense.

The CARS.GOV site says DO NOT refer to the original ELVES list and to refer only to their list. This, coupled with the "refresh" of EPA MPG ratings on over 100 makes and models, has left dealers with the task of managing uncertainties surrounding how to qualify a deal and how to get reimbursed for the monies they are fronting by putting the new cars on the road.

Read NHTSA's Amendment related to the timing for disabling trade-in vehicle engines

Money received from the program counts as taxable income

This is actually no surprise. The surprise would be if they didn't take some of the profitability back as ordinary income. Certainly, if the profitable dollars lie in the "clunker" trade, they would be liable to federal tax. The questions will come in the form of the state tax liabilities and corresponding write-offs for the business as they seem to have yet to be vetted in most states.

Read the IRS auto advisory bulletin

Dealers are still encountering registration issues

In the first part of this newsletter I made it clear that, notwithstanding the broader macroeconomic issues surrounding this program, showrooms will be full of customers. How the government could announce this program months in advance while drumming up hype, green-light deal making three weeks BEFORE the details of the plan are released and dealers can even register is plain NUTS! There are dealers still wrestling with their factories to get the right codes, and many are still unable to register.

From the consumer's view, the CARS.GOV site seems to be populating the dealer listings that are "in program" with the corporation name, not the DBA (doing business as) name. So, when the customer sees "440 Jericho Turnpike Auto Sales" how would he know that that is Ford Lincoln Mercury of Smithtown? Thanks for the listing!

Put It All Together!

"Listen to me very carefully. There are three ways of doing things around here: the right way, the wrong way and the way that I do it."- Ace Rothstein (Robert DeNiro) in Casino, 1995

Now is the time to look at your stores and put it all together, integrating all you've learned to maximize results. Here are some ideas. Please pardon the self-evident and just consider them reminders:

First - Be sure to familiarize yourself with all of these programs and your current factory incentives as they relate to your store and all its departments:

• Register & Get Certified, if you haven't already, as soon as you can with the NHTSA at CARS.GOV. Review the registration criteria carefully.
• Meet to create goals and parameters for your dealership, communicating them to management. Perhaps assign teams for the program.
• Prepare and train all staff, including service, to field inquiries. Print information sheets for all staff. Set systems and procedures for qualifying and non-qualifying trades.
• Continually update yourself on the program - resources are being provided by Edmunds here: Cash for Clunkers.

Second - Prepare your marketing to piggy-back on the hype.

• Be sure your Internet department maximizes SEO to include the appropriate local search terms. Also add call-outs to your Web presence for the Cash for Clunker program.
• Although I'm not a huge advocate of using social networking sites as a means to increase sales, utilizing them today for the purpose of answering questions is a good idea.
• Prepare communications to ALL databases of the dealership. E-mail blasts, snail mail, and auto calling campaigns can be VERY effective.
• Integrate Cash for Clunkers call-outs into ALL current advertising, including service. Put out the maximized cash-to-customer ads. Here is an EXAMPLE for Nissan's Altima Hybrid:
  • $3,200 Nissan Cash
  • $2,350 Federal Tax Credit
  • $4,500 Cash for Clunker
  • $1,000 Sales Tax Write Off
  • $1,500 State Hybrid Tax Credit
  • $1,500 Dealer Cash
    TOTAL CASH POSSIBLE: $14,050!!!
    SEE EDMUNDS CASH FOR CLUNKERS CALCULATOR
• Search for quick sales. Have all service advisors, F&I managers and sales teams look through their records for recent undone deals that may be able to be tipped with a voucher.
• Find qualifying cars that service at your dealership and call out for the Cash for Clunkers program.
• Find rough credit deals that may work with the added down payment a voucher may supply.
• Find some deals that had weak trades that a voucher can close the gap.
• Communicate your store's available SBA and assurance programs to your banks in hopes of getting better consideration. Push to unfreeze credit at your store's banks.
• Phone scripts: "Good morning, XYZ Motors, are you calling about the Cash for Clunkers program?", "Good Morning, XYZ Motors, Yourtown's Cash for Clunkers redemption center." "We have trained Cash for Clunkers advisors on staff for this program."

Third - Showroom presence. Here is what I think is most important. It's "let's make a deal" time! Have your inventory broken out in a number of ways ahead of time:

• New inventory that qualifies-grid out inventory based on MPG so you can quickly determine the amount of the voucher for a qualifying clunker based on the differential in MPG.
• See if you can pair a "TOP 5 Cash for Clunker Deals!" for your store.
• New inventory that DOES NOT qualify-pair with trades that DO NOT qualify to offer comparable deals in the dealership. "Hey Mr. Customer, although you car doesn't qualify for the voucher, we have an in-house program to take your trade-in for the same amount". You can bundle incentives and move some laggards, aged inventory and retiring vehicles in this way. It also gives you the option of moving the customer into your entire inventory, regardless of the MPG guidelines, and your pre-owned units.
• Pre-owned as to what you might like to take in and what you'd like to move. Most deals coming in should be balanced for all aspects of your total sales and inventory wish lists.
• For the deals that don't qualify and you don't want, consider a "Clunker Reconditioning" service program and try to make them clients for another time.

Prepare your dealership to welcome in customers. Separate yourself from the pack with some curb appeal that speaks to these federal programs. Make it New Year's Eve every day during the program.

Call upon the best of your ideas, experience, and knowledge and use this unique point in automotive marketing history to jumpstart you dealership. I believe car dealers can make much more of this than is being forecasted, which is why I vehemently disagree with the pundits.

So, if you haven't done so already, take action! Now is the time to be proactive and seize those new car sales. Edmunds is scheduling webinars and face-to-face seminars for associations and dealer groups as part of our Dealer Outreach program to further assist with program details and strategies. There is no charge for participation in these Edmunds events. Feel free to contact me directly with any questions.

Resources

1. 

   Cash for Clunkers Stimulus Bill

   Curious about the Cash for Clunkers Bill that passed Congress? We take a closer look at the program in our Cash for Clunkers Stimulus Bill page.
   Read More

2. 

   Cash for Clunkers Calculator

   Does the Cash for Clunkers program make financial sense for you? Use our Cash for Clunkers Calculator to find out.
   Read More

3. 

   Eligible Vehicles List

   Want to find out if your vehicle is eligible for the Cash for Clunkers program? Take a look at our Eligible Vehicle List to find out if you qualify.
   Read More

4. 

   Cash for Clunkers FAQ

   What are the restrictions and requirements of the program? We have spelled out the answers in our Cash for Clunkers FAQ section.
   Read More

5. 

   Good Purchase Candidates

   Wondering what type of vehicle can replace your clunker? Check out our list of Eligible New Cars to help you decide.
   Read More

Good Selling!

John Giamalvo, Director, Strategic Marketing
DealerInsight@edmunds.com