It's a great way to revitalize the used-car market too. Cash for Clunkers created a huge void in the used car market. Even if the car was worth $500, the dealership was forced to fork out $4500 for the clunker, and destroy the car; IF the car was worth $4400, that car was still to be seized and destroyed.In the end, it is a win win for Morries and many of the other car dealerships that do this exact thing. They keep it for a few weeks, if it sells, ok; if it doesn't, they auction it off and most likely break even. It's moving inventory.
The other factor is, it cleans up the lot. Having broken down cars/older cars/bargain basement cars on the lot makes the dealership look not as reputable. Also, if something does go wrong with a bargain basement car, it could damage the reputation of said dealer. Also, these cars are cheap for a reason, low profit and low commission. The dealership washes their hands of the car and moves on.
Quite a few of the larger dealerships operate like this.