Cash for Clunkers Gives Car Sales a Jump-Start
No one in Congress or the
Obama Administration has suggested that the new Cash
Allowance Rebate System (AKA cash for clunkers) program would serve as
a permanent fix to what’s ailing car dealerships across the country. What
they hoped would happen is that by offering a rebate ($3,500 to $4,500
depending on the vehicle), consumers would turn in older gas-guzzling and
polluting cars and trucks for new, more fuel efficient models. Based on
some early results, it appears as though the program is working and could
have worked even better had it been open to include a wider range of clunkers.
Cook, owner of Cook Chevrolet Pontiac Buick in Vassar, Mich., said
that the first weekend of the rebate program was the busiest his
dealership has been in months. “I’m going to sell in a week what
I sold in a month,” he told The Wall Street Journal.
Adamson, who owns three car dealerships in the Rochester, Minn. area,
said sales had tripled at his Chrysler Dodge, Hyundai and Lincoln
way more than I could have anticipated,” Mr. Adamson told the Journal.
Questions: Will the government’s $1 billion “clunker” rebate program give
car sales a short-term boost for a year or two? Will this be enough time
(or not) for auto manufacturers and dealers to stabilize their businesses
and look to a period of growth as the economy slowly improves?
Commentary] One of the biggest complaints about the federal program
is the limited number of clunkers
that qualify for the rebates.
look at the government’s website shows a 1992 Saturn SL1 with 255,000
miles is not eligible because it is estimated to get an average of
24 mpg. Now
buying a new 2010 Toyota Prius, for example, with 50 mpg would be a
significant improvement in gas mileage over the Saturn. Depending on
the Saturn owner’s finances, the $4500 rebate could be the difference
between buying a new vehicle or hanging back.
the other hand, a person could trade a mid-nineties pickup truck with
similar miles on it for the same model in the current year. Under the
government plan, the pickup owner would be eligible because the old
vehicle got less than 18 mpg overall while the new version might get
if the mileage between the two vehicles is in any way similar, the
Saturn trade would make better sense for the environment and the nation’s
energy strategy while giving a bigger boost to vehicle sales since
all cars and trucks that currently are eligible would remain so and
new ones would be added. Of course, that isn’t part of program.