Cash for Clunker Interest Slows
Posted by: David Welch on August 14, 2009
What started with a bang could end with a fizzle. The government’s cash for clunkers program was a smash out of the gate. People stampeded showrooms after its late-July launch to trade in an old beater for a check of $3,500 or $4,500 to put toward buying a new and more fuel-efficient car. But since the early days of the program, interest is fading.
The government said on Aug. 7, dealers sent in applications for 245,000 clunker check totaling $1 billion. That taps out the first round of funding and President Obama approved another $2 billion. But just as that new money got the green light, showroom traffic and inquiries about the clunker program is fading. There are fewer eligible clunkers on the market and a lot of the eligible inventory has been sold.
Carmakers would be happy to build more compacts and family sedans if that’s the only thing slowing the success of clunkers. But Edmunds.com, which tracks vehicles pricing and buying data, says there’s something else at play. When the public thought that the program would cease after the first billion dollars was spent, they rushed to dealerships. Now that there is more money, there’s no urgency to get there. In fact, car shopping on the web that is tied to the clunker program is down 15% from its peak. By Aug. 20, we could be back to pre-clunker sales levels, Edmunds.com says.
That has some analysts wondering if the remaining $2 billion will be spent. John Wolkonowicz, an analyst at IHS Global Insight, says that there could be cash unspent into November and not all of it may be spent, period. J.D. Power and Associates thinks that most of the cars purchased through the program were simply sales that would have happened this year but were pulled ahead a few months. The company thinks that as few as 20% of the cars bought in the program are really new sales to the market. That means that as many as 80% of the cars would have been sold this year anyway, says Gary Dilts, president of J.D. Power’s auto industry group. The clunker program was clearly a nice boost for a struggling economy. But the cool breeze it gave carmakers could hit the doldrums.
