Cash for Clunkers Gives Car Sales a Jump-Start

Discussion
Jul 28, 2009
George Anderson

By George Anderson

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.

Steve
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.

Mike
Adamson, who owns three car dealerships in the Rochester, Minn. area,
said sales had tripled at his Chrysler Dodge, Hyundai and Lincoln
Mercury dealerships.

“It’s
way more than I could have anticipated,” Mr. Adamson told the Journal.

Discussion
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?

[Author’s
Commentary]
One of the biggest complaints about the federal program
is the limited number of clunkers
that qualify for the rebates.

A
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.

On
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
25.

Obviously
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.

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14 Comments on "Cash for Clunkers Gives Car Sales a Jump-Start"


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David Livingston
Guest
11 years 9 months ago

Most likely this program will slow the decline in sales taking place. There are a lot of restrictions. I tried this and the dealer told me the old car had to get less than 18 miles per gallon. Well unless you have some old tank, most cars made get better than 18. So most old cars won’t qualify.

I think if the government wants to make this program work, they simply should give anyone who buys a new car $4,500 with no fine print restrictions. If the government would just subsidize every single new car purchase with $4,500, it would result in greater demand for new cars.

Janet Dorenkott
Guest
Janet Dorenkott
11 years 9 months ago

I agree with David. Between my husband and I and my 3 teenage kids, we have 5 cars. One is a ’99 Nissan with 120k miles. It runs okay, so we keep it, but if it qualified, I’d trade it in in a heart beat. Of course, it does not qualify because it still gets decent gas mileage. Also, I believe there are income restrictions that would disqualify me.

Obama needs to lift the restrictions and focus on the economic benefits as much (or even more so) as the environmental benefits.

Anne Howe
Guest
11 years 9 months ago

This program does not reward those of us who have old cars that actually get good mileage. Once again, I feel screwed.

I think I want to move to a city with good public transportation and just give up the car scene altogether, since it wouldn’t matter so much what Lutz does then for marketing or advertising for the crappy cars GM makes. But for now, I will drive my 2003 BMW with its 90K miles and its 25mpg and enjoy my ride in a brand that actually stands for something.

Anne Howe
Guest
11 years 9 months ago

Oh by the way I am a lifelong Detroiter. Anybody want to buy a really nice house?

Tony Orlando
Guest
11 years 9 months ago

Another boondoggle in the works. It’s a disgrace what is happening to capitalism today. Companies that should fail are getting subsidies, and small business innovation is being stifled because we cannot get financing. But if you’re well connected to the powers that be, then money is no object.

We are slowly losing our way of life in this great country and unless things slow down with all the legislation being pushed through, what chance do real market-driven ideas have?

Keep your subsidies; show me a great product at a fair price, and I’ll buy it with the resources I’ve earned myself.

Sharon DeJohn
Guest
Sharon DeJohn
11 years 9 months ago

My sister has a 1990 Buick Riviera. The EPA says that her average gas mileage is 19, so she does not qualify for the rebate. To be honest, she would be thrilled if she got an average of 19 miles per gallon. In looking at the cars that qualify, the list is very limited.

Charles P. Walsh
Guest
Charles P. Walsh
11 years 9 months ago

Tony Orlando of Tony O’s markets…your comments today are the highlight of the RetailWire Panel discussion. Hooray for you and a lesson for us all; small businessmen and women, make up the backbone of this economy, not multinational corporations, and they understand demand and supply.

Thank you for pointing out the real issues surrounding this subject of “cash for clunkers.”

A large number of Americans, including many of the esteemed panelists of RetailWire, seem to have forgotten the benefits of a free market and its checks and balances.

Adam Smith has left the building.

Kevin Graff
Guest
11 years 9 months ago

Read the comments above from Tony Orlando of Tony O’s markets. He gets it. Enough said!

George Anderson
Guest
George Anderson
11 years 9 months ago

While we’re applauding the free market system here, let’s remember that is what the free market system in banking and insurance that went totally unchecked and caused the need for bailouts and stimulus packages in the first place.

While slightly afield, it would also be helpful to remember as we hear executives or industry representatives complaining about the cost of frontline labor be it retail store associates, warehouse workers or people on the assembly line, that total compensation when adjusted for inflation has continued to grow at a snail’s pace or decline for hourly workers for years while executive compensation has increased beyond comprehension. That’s your free market for you!

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
11 years 9 months ago

I like the idea that Chrysler (and some Ford) dealerships are matching the $4,500 for cars that qualify, and published wisdom in car magazines and newspapers report that you’ll get a better trade-in from the dealership if you don’t appear in your clunker when negotiating. Arrive in a different vehicle. They’ll negotiate without laying eyes on the car.

Kai Clarke
Guest
11 years 9 months ago

This is a great idea that is truly working! This program allows for us to jump start the economy, add impetus to an ailing auto industry, save jobs, create immediate demand in the auto industry as well as the peripheral industries that support it, decrease auto emissions, decrease our demand for oil (better mileage from all of these cars), increase the safety of drivers since they are driving newer cars with better safety, get rid of the older cars from our streets, and immediately have an impact on our economy. The trickle down impact will be tremendous for months to come.

Jerry Gelsomino
Guest
11 years 9 months ago
I would think that turning in old clunkers has several advantages. Yes, it does give a boost to car sales, but it also puts people in a better mood driving a better car, plus others feel better looking at newer cars. Yes, I think making the automotive landscape better looking puts everyone in a better mood. Remember the depressing 70’s automotive crisis? I can still recall living in Chicago and seeing the Midwest autos breaking out in rust and metal decay. How depressing. You may think this is ridiculous to equate visual appeal with consumer attitude, but here in Hong Kong, cars are immaculately CLEAN! My wife’s car is washed every day in the garage where she parks it. Taxis are always clean; even trucks for the most part are pretty tidy. And look at this economy! I have to say as devil’s advocate to my idea, cars in Beijing were pretty dirty on my last trip there. And their economy is strong. Oh well, just a thought.
David Livingston
Guest
11 years 9 months ago

Did some more talking with my car dealer friends. Seems anyone who is driving an old clunker with a low mpg rating typically doesn’t have the wherewithal to buy a new car at any price. There are just too any restrictions. I’m told the car has be been owned for a certain period of time. It has to be insured. In Wisconsin, poor folks don’t buy insurance.

Responsible people woke up a long time ago and bought high mileage cars in the 1990s. That’s why the Big Three are in trouble because consumers did not buy their low mileage cars. Now those Toyota and Honda clunkers don’t qualify. I agree with my dealer friends; people driving the old clunkers will just have to keep on driving them because they are broke and their credit is shot. The Big Three need to unload their inventory of undesirable cars and, for all practical purposes, they need to drop the bottom line price about 30-40%.

Marsha Tunnell
Guest
Marsha Tunnell
11 years 9 months ago

Wow–Can’t believe all the negatives. Takes old cars off the streets, which should improve the environment. Encourages sales of new environmentally-friendly cars, which helps automakers, local dealers and consumers. I traded in a Ford Expedition this past weekend with the program. Easy, easy. Would probably have bought a used vehicle & kept the old car if not for the C4C deal. I’m a happy camper.

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