More than half of U.S. 'clunkers' traded in for foreign cars

While the top 10 clunker trade-ins are U.S. brands, 53 percent of the new cars purchased are foreign brands. Ford Focus is the top seller, but the American car is followed by the Toyota Corolla, Honda Civic, Toyota Prius and Toyota Camry. That's probably no surprise because the widest choice for fuel-efficient cars can be found in the foreign brands. That's exactly what helped to seriously wound the U.S. auto industry.

Luckily for U.S. employees, however, many of the cars in the top ten vehicle purchases are manufactured in the U.S. In addition to those in the top five, the rest of the top 10 includes Ford Escape, Hyundai Elantra, Dodge Caliber, Honda Fit, and Chevrolet Cobalt. U.S. car makers could have more in the top 10 if they offered more competitors in the fuel-efficient category.

Most of the vehicles being traded in are trucks and SUVs, including Ford's Explorer, F150 and Windstar, Jeep's Cherokee and Grand Cherokee, Dodge Caravan and Grand Caravan and the Chevrolet C1500 Pickup. That's good news for the environment as well because the average mileage for trade-ins is 15.8 miles to the gallon, while the average for new vehicles is 25.4 mpg.

The U.S. Senate may pass legislation to add $2 billion to the program as early as this evening. Senate leaders are negotiating to pass legislation with the exact same language as the House bill passed last week. If they fail, the bill could be held up until September when the House returns to work. Any delay could mean the program will run out of money in about a week. The Treasury Department reports that it received 157,000 vouchers for cars totaling $664 million of the $1 billion currently available as of Tuesday, but more orders probably need to be logged in.

Some worry that diminished car inventories could hurt the program because cars are moving off dealer lots more quickly than they can be replenished. Ford (F) dealers are running low on its two top sellers -- Ford Focus and Escape. Toyota reports that it increased production on several of its vehicles in June so it will have no problem meeting demand, except for the Toyota Prius. Toyota (TM) reports that it only had a 13-day supply of the Prius at the current rate of sales. It reports a 37-day supply for Toyota Camrys and a 34-day supply for Toyota Corollas.

Generally, a 65-day supply is considered optimal and dealers usually stock about an 80-day supply, but inventories have been declining because dealers were not stocking up during the economic downturn. Ford had planned to increase production in the third quarter, but will likely have to speed up those plans. Chrysler's dealers are in the worst position to take advantage of this uptick in sales because it shut down plants in May and part of June as it reorganized in bankruptcy court. Chevrolet has said that shortages at some dealerships are not representative of the entire network.

Lita Epstein has written more than 25 books including Trading for Dummies.


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