Allow me to share my story of searching for a new Prius as an indicator that car dealers are abusing Cash For Clunkers.
I have been considering buying a new Prius. I am not eligible for the Cash For Clunkers program. I went into a dealership in Nashville, TN the month before Cash for Clunkers started, and this particular dealer had 4 or 5 Prius's on the lot. The MSRP (manufacturer's suggested retail price) for the model II which I wanted is $22,550.00 This was the price quoted me at that time.
I returned this last week to go ahead and close a deal on a Prius and learned that they had none in stock due to demand from the Cash For Clunkers program (Good news. Glad to hear the program is working and sending people to the dealer). But when I asked pricing, I was told that due to increased demand, dealers were adding on $1,500 to $3,500 to MSRP (Bad news! Dealer is converting program dollars to profits).
I beg your pardon? Increased demand that was created with tax dollars through a legitimate government stimulus program is having anywhere from 33% to 77% of its money converted to increased profits for the dealer. This is a very troubling problem. I suppose it is no worse than bailing out a bank, but it is penalizing all those folks not eligible for CFC who are seeking to buy a new car.
Clearly, despite the benefits of the program, is a real problem with the technical details of the legislation. We should be demanding that dealers stick with MSRP in pricing.