Mustang Industry: Cash for Clunkers, How will it effect your business?

There is a lot of talk about the new cash for clunkers legislation that aims to take older vehicles off the road. Many aftermarket parts suppliers, an independent repair, and body shops have been wondering how this will affect their business. In our industry the Mustang & Classic Ford restoration/performance market, reports suggest that there should be little change and there is even potential for growth. A report by BB&T suggests that most people that will be taking advantage of the program will be lower income drivers, market research shows that this demographic does not spend a significant amount on non-essential automotive products.

Since most Mustangs from 1979-2004 still demand a higher resale value on the open market, most drivers will opt to sell vehicles in place of trading them in. Another factor on the number of vehicles that would be scrapped include buyers qualifying for new car financing, with credit already hard to obtain, low-income drivers will have a hard time finding an approval for a new car loan. Even if a consumer went from 18 mpg to 30 mpg the savings in fuel would be less than $50 a month. Many people driving 15-20-year-old cars are not going purchase $30,000 hybrids, using only the rebate as a down payment a $28,900 Ford Escape Hybrid for five years will cost nearly $575 a month at 7% interest. Here in California most of the Cash Ford Clunkers rebate will be eaten up by newly passed sales tax hikes and higher registration fees that in some parts of the state can add almost 13% to the purchase price of a new car.

If you are still concerned that Cash Ford Clunkers programs could affect your business, there are several ways you can diversify your product offering to appeal to a broader market. If you only offer classic parts perhaps expand into late-model, if you specialize in Fox Bodies expand into other 70’s-90’s pony cars such as the Camaro. The only vehicles we may see diminished in our industry are later model Mustangs, however, the lower value cars in this segment such as the 2.3 four-cylinder Mustang’s of the 80’s and 90’s may not offer enough fuel savings to justify the car payment. These programs will not be removing large SUV’s off the road, and will more than likely be taken advantage of by people that were in the market for a new car anyways.

Where the aftermarket may see a major benefit is with as many as 3,000 more dealerships closing, maintenance parts will need to be supplied by aftermarket shops. If you happen to be in a region where a dealership is closing you may want to start aggressively promoting your company as an alternative parts, repair, and maintenance facility. The aftermarket may benefit from this bill by receiving good running parts cars that would be sent to dismantlers, however, neither of the bills have a clear outline of what would happen to the “clunker” once it is turned it. Without clear definitions on this aspect of the legislation, the environmental gains could be limited or even detrimental if vehicles are not properly dismantled and disposed of, or if they simply end up being exported to Mexico and Central America the overall “carbon emissions” will only increase worldwide.