Salvagers Worry CARS Program Will Hurt Scrap Market

Some auto salvagers in Tennessee are worried the so-called “Cash For Guzzlers” program will drive down an already weak market for scrap metal.

The Car Allowance Rebate System mandates inefficient trade-ins be crushed or shredded, and the raw metal is then typically sold by weight.

David Rawls says last summer his family’s auto salvage business could get $4 for a ton of raw steel. Now, they average less than half that. Rawls says that’s largely due to falling demand.

But with the new CARS program budgeted to scrap some 250 thousand extra cars, Rawls worries it will saturate the scrap market, and pull prices down further.

“I’m just saying I wonder if it’ll actually overpopulate the market where it’ll trickle down when we’re – We’re not making enough on scrap the way it is now. I don’t see it getting any better; I just see it getting worse.”

Rawls says he’s been able to make up some of the lost income over the last year by selling more spare parts, as more drivers look to repair their current vehicles to avoid buying new ones.

Even so, Rawls Auto Salvage has already cut wages and laid off three workers.

More on the program:

Click here to see the list of participating Tennessee dealers.

To ensure the “guzzlers” being traded in under the program don’t wind up back on the road, dealers are required to disable the engines. They do this by pouring sodium silicate – liquid glass – into the engine and running it. gg

For this service the dealer keeps $50 of the scrap value paid for the car.

The salvager can sell off other parts of the car, outside the engine and drive train, for up to six months before actually crushing or shredding the car.