Average clunker worth only about $100-$150, salvagers claim
This article first appeared in the St. Louis Beacon, Aug. 9, 2009 - Despite the popularity of the "Cash for Clunkers" program that many are calling the most visible sign of the stimulus passed in February, auto salvage yards in the St. Louis area are looking forward to minimal returns, including a dearth of recyclable materials from the clunkers.
The program, which replaces gas-guzzling clunkers with newer, more efficient cars with a $3,500-$4,500 government voucher as an incentive, drained the allotted $1 billion in roughly four days last week, prompting the Congress to vote to provide an additional $2 billion for the program.
Voting in contrast to party lines, Missouri Sen. Christopher "Kit" Bond, Republican, voted for the measure and Sen. Claire McCaskill, Democrat, voted against.
Those cars that qualify must be no more than 25 years old, get less than 18 miles a gallon, and must be registered and insured for a full year prior to the trade. A licensed and approved recycler from a salvage yard destroys the engine using a solution known as "liquid glass" to insure they are never used again, and can then sell or recycle the parts in 180 days, or about six months.
Salvage yard owners say the average cost of a scrapped car is around $100 and is often not worth the labor to pull parts off outdated clunkers.
"Everybody thinks you're making a killing, but they'd think differently if they saw the work that goes on out here in the yard," said Jack Dalton, owner of Jack's Auto Sales and Salvage in St. Charles. "The average clunker is worth about $50 to $100. You have to pull those parts, find a place to put them, set up an inventory. It's a process."
Dalton believes that getting these cars off the road might be undercutting those who cannot afford new car payments even with the credit.
"To me, it looks like it cuts poor people out. The cars that they're able to buy are the ones we're getting ready to destroy," said Dalton. "But that looks like the plan: Get the junkers off the road."
One salvage yard owner -- Jewell Coffman of J&K Auto Parts and Salvage in Pevely -- went so far as to equate the program to a tax, claiming that many of the cars would be wasted rather than recycled.
Scrap metal, as a commodity, fluctuates and is currently being sold for low rates. The actual worth of the average clunker, Coffman says, varies depending on the demand of the part in question, which she believes will likely be very low.
"Nobody's going to want the parts off a 2003 Impala," said Coffman. "After 180 days, you have to crush everything and throw it away. Some cars aren't going to be worth anything after that motor's destroyed."
Both Coffman and Dalton say that the clunkers will likely valued at less than $4,500 after pulling, selling parts and recycling.
"Sure, you'll have some nice cars getting traded in, with some parts that might be worth something," said Dalton. "But most of them are just junkers."
However, Alan Gubin, President of Rimco Inc., a metal scrapping and salvage yard that shreds nearly 100 cars weekly, believes that after shredding the vehicles and shedding them of non-metal materials, recycling them to mills that pay per ton could garner some profitable returns.
Gubin says he's been contacted and is looking forward to bringing in clunkers from dealerships.
"Our rates are based off the current market value, but on average, by the ton, we can get over $200 or $300 a ton from mills," said Gubin who says how the mills recycle the materials sold depends on what the mill produces.
St. Louis automobile dealers say the program is promoting business for the ailing auto industry.
"It's been a very, very nice shot in the arm for us," said McMahon Ford general manager John Schicker. "We've made about 35 clunker deals and it's probably given us about 200 contacts."
Schicker says McMahon Ford has also done plenty of business with people owning cars that do not qualify for the Cash for Clunkers deal, but came by out of interest in the program.
"Other people have discovered that their car is actually worth more (than $4,500). It's been very positive; We've had to order more cars, which is helping the UAW worker, the supply worker, who might be hurting right now," said Schicker. "You have to do it, no if, ands or buts."
Donald Levin, marketing manager for Dave Mungenast Honda, says their dealership has taken in over 100 clunkers, with government checks rolling in Thursday.
Levin dismissed critics of the program who claim it to be a boondoggle, no-gains program.
"Well, it's not hurting employment numbers. The auto industry has always been an economic engine for growth. It employs a lot of people, from the manufacturer to the dealerships here locally. I think it's a net win," said Levin.
The St. Louis Automobile Dealers Association said that they had no comment on the program, while Sally Oxenhandler, spokeswoman for the Missouri Department of Transportation said that the department has yet to weigh in on the program.
"MoDOT always supports efforts to make the environment cleaner with more fuel-efficient cars. On the other hand, that's less revenue to repair and maintain highways and bridges. We believe it's important for state and national leaders to continue the discussion," said Oxenhandler.
Zack Stovall is a freelance writer in St. Louis.