For all of its hassles, red tape and late payments, cash for clunkers added dramatically to most car dealers' profits in August.
Many cleared their lots, often at high-margin sticker prices. Others gave away margins but made up for that with higher volumes.
"The bigger picture," says Paul Taylor, chief economist for the National Automobile Dealers Association, "is a return to health and profitability for dealers. That's been going on all year. The clunker program certainly helped."
Just ask Earl Stewart, owner of Earl Stewart Toyota in North Palm Beach, Fla. "August will be the best new-car profit results I've ever had as a car dealer," he says. "Ever."
Stewart sold 462 new cars in August, beating his all-time best sales month from happier times in 2007. The 286 deals his single store made under the clunker program made it possible.
My Auto Import Center, which sells Audi, Nissan, Subaru, Toyota and Volkswagen vehicles in Muskegon, Mich., sold its cars at or near sticker price in most cases under the clunker program, General Manager Scott Campbell says.
"We stuck with whatever was on the window," he says. "We sold the majority of our cars that way. Prior to this, we would have had to give it away."
The store realized an average gross profit of about $2,500 on the 14 vehicles it sold on the Friday before the program ended Aug. 24. The store had been averaging gross profits of $1,100 to $1,300 per vehicle before the program started, Campbell says.
Cash for clunkers wasn't all gravy. Dealers had to absorb the profit-eating expenses of personnel overtime and added advertising costs -- plus the loss, in some cases, of lucrative used-car sales.
Earl Stewart notes that his used-car sales fell amid the hoopla over new-vehicle sales. And used-car grosses were "just so-so," he says.
In the first few weeks of the clunker program, Stewart found it necessary to hold down new-car transaction prices because his competitors were advertising heavily all around him. It was only in the final two weeks of the program in August, when some competitors abandoned the program in frustration, that Stewart began raising his prices to sticker levels.
"That's when we made our profit," he says.
Brian Benstock, general manager of Paragon Honda in Woodside, N.Y., says his push for new customers under the program also forced him to hold down his prices, trimming profits per vehicle. His per-vehicle gross profit ran $200 to $300 lower than normal during the program. But he made up for it in volume.
"Profits were down on a per-unit basis, which allowed us to sell a lot more units, which allowed us to make a lot more money," Benstock says.