Cash for Clunkers success pales next to its hype

Posted by: David Welch on August 26, 2009

The government’s Cash for Clunkers program is over and still the spiff is getting more post-event coverage than any Super Bowl I can remember. The Transportation Department, not surprisingly, has labeled the program a great success. Some analysts have been far less effusive. They say the program was effective in selling cars, but the boost won’t last long enough to really help the car industry for very long. Edmunds.com also shows different data than the government, claiming that pickup trucks sold better than the Transportation Department is letting on.

While the program did its job, its real contribution has been less than the hype. Cash for clunkers did spur sales. It sold 690,000 cars and many were compacts like the Ford Focus and Honda Civic. So it did accomplish the mission of scrapping some old iron and selling some more efficient cars. That said, the boost will amount to less than a 3% increase for the year. That’s hardly the windfall that Germany achieved from a similar program, which pushed sales up an average of 30% a month since March. There may also be a hangover in car sales in the U.S. Edmunds says that purchase intent is now down 11% from June, meaning that fewer people are looking at new cars. So sales could slump in the coming months. In fact, J.D. Power says that more than 70% of sales may have happened later this year even if the government hadn’t spent $3 billion on the clunker program. One other point: Toyota was the biggest beneficiary, getting 19.4% of sales, with General Motors getting 17.6% and Ford getting 14.4% of sales from the program.

Then there’s a minor tussle over the most popular cars. The government’s figures say that the top 10 seller were all compact cars and small suvs. Without all the data in, Edmunds says the Ford F-150 pickup and Chevy Silverado were also in the top 10. We may get a final call on that when all the data is in.

The bottom line: The program did its job, but with just $3 billion in funding its mission was always going to be limited. Cash for clunkers came and went in about two months. But now automakers must sell in an economy whose fundamentals are still weak. It will be a tough road for some time to come.

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Reader Comments

Karl

August 26, 2009 05:17 PM

I think that the entire nation is very excited for the- 'Cash for Refrigerators' program that will most likely be launched by our government, don't you? Car sales in the USA will be just like the refrigerators we'll be buying in the months to come; COLD!

Squeezebox

August 26, 2009 05:23 PM

True it cannibalized sales, but it also took 680K gas hogs off the road. Less gasoline needed, less carbon from tailpipes, less carbon from refineries. It also raised the going price of a used car, which encourages people to take the bus or fix their cars.

Squeezebox

August 26, 2009 05:23 PM

True it cannibalized sales, but it also took 680K gas hogs off the road. Less gasoline needed, less carbon from tailpipes, less carbon from refineries. It also raised the going price of a used car, which encourages people to take the bus or fix their cars.

DKP

August 26, 2009 05:49 PM

Just another make-work program by the current administration primarily to placate their UAW buddies. These auto and housing subsidies are a finger in the dike.

Richard

August 26, 2009 06:37 PM

The government bungled a good program by confusing the dealers and the public. Just 30 minutes ago, a co-worker showed me the car she purchased with the cash for clunkers program. She traveled all over Denver to find a dealer that could giver her a no-hassle deal. Most of the dealers didn't want to deal. The dealers were afraid they wouldn't be reimbursed by the government or that their portion of the reimbursement would take too long. In the end, she paid an inflated price to make it worthwhile for the dealer to do the deal.

Michael

August 26, 2009 07:24 PM

Another hit piece from the conservative media. Anything Obama does must not be successful! Note how they compare the ANNUAL impact in the US (3%) to the MONTHLY impact in Germany. What hacks. The monthly impact in the US was larger!

Matt Fahy

August 26, 2009 07:42 PM

This article lacks basics facts. It is clear by any economic measure that this was a successful govt. program that created GDP growth and jobs for an industry hit by the economy the hard. Some people just want demonize everything govt. does and even though I see plenty of inefficiencies in govt, this is not one of those programs.

David

August 26, 2009 07:44 PM

If the program was successful by any measure, why not continue it?It's a bit foolhardy to end the program now, if that program has had some quantifiable measure of success unlike money thrown at the financial institutions whose measure of success has not yet been as evident.

ernie t

August 26, 2009 07:56 PM

program try crime taking money out of the left hip pocket of hard working americans and giving it to dealers(ya think that the customer got the cash then by my bridge) then taking perfectly useable cars and totally trashing them then doing it again for more money then doing it for fridges- take my money for cash for clunker politicans

Nixon of the Lizard People

August 26, 2009 07:57 PM

Yes, the Cash for Clunkers success is paled by the Hype. But all the WHINING about Cash for Clunkers massively pales both the success AND the Hype by a few orders of magnitude.

I've never seen such a boatload of whining over a 2.88 billion dollar program. The blogosphere is utterly choked with whinny posts about CFC, even from folks who got a new car out of the program!!

JACOB

August 26, 2009 08:03 PM

WHAT ABOUT ALL TH FAMILIES OF BLUE COLLR WORKERS THAT ARE MECHANICS THAT COULD HAVE BEEN WORKING ON ALL THESE VEHICLES THAT HAE NOW BEEN SCRAPPED? HOW COME NO ONE TALKS ABOUT THE SIDE EFFECTS OF THIS PROGRAM? AND THE TOW TRUCKS THAT ARE OUT OF TOWS FOR CARS THEY COULD HAVE PICKED UP? AND SO ON AND SO ON

Karl

August 26, 2009 08:44 PM

I wonder if car dealers can do what banks were doing, since they have all the information necessary, regarding taking out 'SECRET LIFE INSURANCE POLICIES' on their employees? 'Google' this- BANK OF AMERICA COMPLAINTS SECRET LIFE INSURANCE POLICIES, and read all about it. Thank you.

Mike

August 26, 2009 10:30 PM

I'd like to thank the unborn Americans, who will bear the $3 billion Cash-For-clunkers debt burden, for contributing $4500 toward my new Toyota. My own debt is really high now but I'll do my best not to default on my car payments. It's good that government encourages folks like me to incur more debt. After all, too much savings got us into this recession.

JoeFromQC

August 26, 2009 11:32 PM

Ugh... Democrats had a successful program... Ugh.. Must find way to discredit it.... Ugh.....

It must be hard to think and breathe through your mouth at the same time.

jimwhenry

August 27, 2009 01:12 AM


Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)

Henry
Blogger
www.cashforclunkersfacts.info
http://www.cashforclunkersfacts.info

jimwhenry

August 27, 2009 01:45 AM


You donot need actual vouchers or coupons to partipate in this program. All dealers are required and government will
reimburse the fees for the clunkers

Henry
Blogger
www.cashforclunkersfacts.info
http://www.cashforclunkersfacts.info

jimhenry

August 27, 2009 02:10 AM

That is correct, Only purchase or lease of new vehicles qualify

Jhenry
Blogger
www.cashforclunkersfacts.info
http://www.cashforclunkersfacts.info

jimhenry

August 27, 2009 02:14 AM

Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)

Jhenry
Blogger
www.cashforclunkersfacts.info
http://www.cashforclunkersfacts.info

Snoz

August 27, 2009 03:22 AM

After Uncle Sam gave away $2trillion to the Big Banks, Investment firms, AIG, GM and Chrysler, the American taxpayer's anger and "green-eye" are justified. The politicians as well as villainous Federal Reserve who caused the financial meltdown are feeling the heat. What must be done to appease the lynching mob hot on their trail? Solution: let them buy a new car through a $4,500 rebate program called "Cash for Clunker" paid for by future taxation upon themselves. Like killing two birds with one stone the $3billion rebate will generate more auto-loan revenue for the Big Bankers sitting in the Federal Reserve while the wealthy corporations receives more bailout. In the background, the dopey proletariat is singing a happy tune thinking he received a freebie from his government. What he truly received is a moment of pleasure for a future severe flogging in the form of hyper-inflation and heavy taxation. Neither does the rebate program make business sense. Everyone knows that the "Cash for Clunker" incentive will move future car sales to the present. At the end of the year, total sales will show only marginal improvement. Since one of the motivation of "Cash for Clunker" is to appease the indignant masses, BW Welch is correct that "the program did its job" but incorrect as to what was the true intended job.

Nobody Special

August 27, 2009 06:40 AM

People that have clunkers normally have them because they can't afford a new car. But cash for clunkers enabled these folks to get a new car with no money down. I wonder if many of these folks can really afford the cars, just like the housing bubble. We'll see, there may be 300,000 repos within a years time. And another government bailout! I for one think this program was a complete failure when it comes to the economy.

RJBJr

August 27, 2009 08:00 AM

There were two purposes for the Cash for Clunkers program.

The first was to "stimulate" the auto companies. The whole idea of the "stimulus" package is to "jump start" the economy. So, the question is not how many cars the "C for Clunkers" program sold, but if this "jump start" will simulate more car purchases in the future. We just don't know that yet. We cannot say the program was a success until the results come in over the next few quarters.

The second objective of "Cash for Clunkers" was to reduce carbon emmissions to save the Earth from Global Warning. Again, we don't know what effect the program has had until global temps get measured over the next few years.

No doubt, Mr. Obama will wait to declare on a snowy mid-February day that the freezing temperature is a result of the "Cash for Clunkers" program.

Jay

August 27, 2009 08:47 AM

Fuel for thought; what's not mentioned in your article is that the gov'ts cash for clunker rebates will be taxed. What a surprise it will be for them. I heard this being reported on the News channel 610 (Schnitt Show) yesterday.

Jay

Westernfan

August 27, 2009 09:35 AM

With the benefit of 20/20 hindsight, perhaps the Clunker program should have offered a smaller incentive, allowing the $3B to last months, rather than weeks. As it is, there will likely be a significant drop in new auto sales in the coming months due to:
-depleted new car inventories
-likely future sales having been pulled forward, rather than new business having been created
-anticipation of future government backed incentives
For these reasons, Sept/Oct sales figures will be adversely affected by the Cash-for-Clunkers program, and when those sales figures come out, it will appear as though auto sales have cratered- again. The percieved "drop" in sales will affect a variety of other statistical measurements of economic activity- falsely indicating a "double-dip" recession, and inadvertantly causing one.

Karl

August 27, 2009 10:23 AM

Small cars don't generate the profits necessary to keep GM, Ford, Chrysler, & Toyota going. They need to sell trucks & SUV's in order to generate the profits that are necessary to sustain their operations. Dealers cannot survive, as they are now, with just small car sales. They need to sell SUV's & trucks too. The average mark-up on a car, for the dealer, is about 10%. So, a car sold for $18,000 nets the dealer about $1,800 IF that sale is made at FULL STICKER (MSRP)! Most sales are NOT at full sticker. So, for every lost sale of an SUV, like a Toyota Sequoia at around $36,000.00, it will take TWO sales of their Corolla at around $18,000.00 to make up the difference, correct? Total sales of new vehicles are DECLINING in the USA, right? Guess what? There are TOO MANY auto manufacturers in the USA, & too many dealers. It cannot be denied.

cah

August 27, 2009 10:30 AM

The Cash for Clunkers in my estimation was an ill conceived program, putting money into the pockets of the unions, who did a good deal to destroy the industry....we fed the hand that bit us! Just as with the 0% financing to jump start the industry after 9/11, which really didn't bring in new buyers; it just brought buyers forward, and at the same time got them used to demanding the 0% financing. I worked in the auto industry for years, so I saw it's affect. It spent a lot of money, which did not really increase sales long term, just robbing Peter to pay Paul. The government has and is continuing to manipulate things so much, at the tax payers expense. Eventually it will all come home to roost. We need to wake up and figure out who is getting rich at tax payer expense, because there are people who are getting fat pockets from all of this, but it is not the common man I can assure you.

Bill

August 27, 2009 05:32 PM

We just destroyed almost 700 thousand vehicles, most of them in fine operating order, that could have been used by people in impoverished nations in countless ways, including seeking food or medical care for their families.

Gary

August 27, 2009 10:31 PM

Hey Michael, Germany's sales have been up 30% for five months. US sales have not been up 30% for five months and in fact have fallen off since the end of Obama's give away program. Further the impact of the program on US yearly sales will only be about 3%. Even if Germany's sales are flat for the remainder of the year, the percentage of increase in German sales will still beat the 3% US sales increase for the year.

Roadblock

August 28, 2009 06:18 AM

Errr, Squeezebox, we spent $3 Billion dollars, many of the cars that were removed from the road had significant value and many of their replacements were also gashogs, e.g. the Silverado and F-150. This was a complete bureaucratic waste, the results were limited and the most transparent government evah! has refused to release the detailed numbers of vehicles sold, which may lead some to believe that perhaps the press was better than the results.

pat

August 28, 2009 10:00 AM

Since 680,000 vehicles were taken off the road, what are the poor folks going to drive? 6 people drive in my family and 3 of those vehicles are over 10 years old. We could not afford a new car payment and we are not considered poor.
History repeats itself. Hitler took over the banking, auto and healthcare industry. Anyone know what happened next?
The definition of insanity is doing the same thing over again expecting different results!

Bamboozled and Hoodwinked

August 28, 2009 11:28 AM

To Michael from August 26, 2009, you are a complete moron. First, nice try with the "hit piece" by the conservative media. What makes liberals so mad when a magazine or newspaper talks about Obama in a negative light? If it's negative, then it must be "a hit piece by conservative media". WTF? You liberals have control over 99% of the media, so don't get bent out of shape when ONE happens to expose your boy.

Second thing; The US's 3% annual increase compared to the German's 30% monthly increase. Big deal. The real story should be Obama spent $3 bil to sell 690,000 cars, of which, 640,000 would have sold anyway. So, in essence, we paid $3 bil to sell an additional 8% in car volume. A total of about $60,000 in tax dollars to move each car off the lot. Good ROI. I am just going to quit paying taxes and say screw you liberals and your social programs. Use your own money for a change!

Karl

August 28, 2009 12:27 PM

I was watching the morning news today & I saw a man being interviewed who heads up the Colorado Dealers Association. He said that auto dealers "should" get their rebate money from the government in about 6 to 8 weeks! Imagine all of the salespeople who might have to wait another 6 to 8 weeks for their commissions checks from the 'Cash for Clunkers' program. Imagine how these dealers feel too! Also, the word "should" doesn't necessarily make people feel very confident, correct?

Rod

September 3, 2009 09:21 AM

C for C may have been a good idea at first, but was it a well thought out plan? What will the after shock of it all be like? What happens when the majority of Americans like me that have 3 vehicles in my drive,(all 10yrs or older) that probably would have qualified for C for C, need a good used vehicle? The people that needed to get rid of their clunkers could not afford a new vehicle anyway so the ones that benefitted from the progam are the wealthy or the people that never do get a vehicle paid off and just keep trading. I saw many vehicles being scrapped that are newer than what most of us drive today. Most would make many Americans happy to drive and were probably less gas guzzlers than what they drive now. In reality we may see more gas guzzlers out there. When will we start bailing out the common American that works like hell to pay all his bills and quit helping the people who can already afford programs like this or the people that don't manage our funds(banks, insurance, auto companies)? Where's my bailout? Give me some of that money that you gave the banks and I'd probably pay off my mortgage, buy a new hybrid, and invest the rest that doesn't go to taxes. Win, win situation for all!

Daoudi

September 15, 2009 10:44 AM

Please don't make the bridge for everything please.Please let study and work please.You like to know my position i'm for the hh team please.

i accpte to do the mercedes team in Uganda or Rwanda please .

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Want the straight scoop on the auto industry? Detroit bureau chief David Welch , Dexter Roberts and Ian Rowley bring daily scoop, keen observations and provocative perspective on the auto business from around the globe. Read their take on such weighty issues as Detroit’s attempt at a comeback, Toyota’s quest for dominance and the search for an efficient car.

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