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.

Reader Comments

Deb Mathews

August 14, 2009 12:25 PM

It started off with a bang probably because people in need saw a chance to get a new vehicle and get rid of the old. Unfortunately, the inquiries stemmed considerably from folks like me...those with cars whose mileage is over 110,000 - but due to original mpg - we don't qualify...give it a year or two and our vehicles won't be fuel efficient...they, too, will be clunkers!

JOHN STEPHENS

August 14, 2009 1:01 PM

OHHH YEA ANOTHER GREAT PROGRAM FROM OUR GREAT PRESIDENT THAT IS WORTHLESS--HEY EVERYBODY THE ECONOMY IS GREAT IF YOU WANT TO BE BROKE---OBAMA IS A JOKE AND SO IS THIS PROGRAM

Karl

August 14, 2009 1:07 PM

Maybe people are 'Googling' this- YOUTUBE DR PAUL CASH FOR CLUNKERS HURTS THE POOR, and watching it, huh? And maybe they're 'Googling' this- YOUTUBE CASH FOR CLUNKERS SCAM KICKBACKS BOGUS TRADES, and watching that too, right?

Bernard King

August 14, 2009 1:34 PM

Mr. Welch, I believe some of your statements & conclusions are from misinformation from industry dependent sources. Loss of public interest in the program has two primary causes. First, continuing dealer duplicity. And, second, the idiocy of the truck qualification rules. Witness re dealer duplicity, my stepson a small business (Mr. Welch, I believe some of your statements & conclusions are from misinformation from industry dependent sources. Loss of public interest in the program has two primary causes. First, continuing dealer duplicity. And, second, the idiocy of the truck qualification rules. Witness re dealer duplicity, my stepson a small business ( Witness re rules idiocy, the 1998 Chevy 2500 "clunker" was a gas V8 with 214,000 miles and an averages over three years of 14mpg. We settled on a new Dodge 2500 diesel rated 3mpg better same heavy duty tow package with a larger cab. Both are Truck 3 by program definition. The sale didn't qualify because the new truck GVW was 400lbs greater than the trade-in.

david wayne osedach

August 14, 2009 1:46 PM

There was a limited number intent on (and able) to buy a new car. For them the clunker program was a $4500. Godsend. The rest of us are cautious of making any major purchases just yet. We may not have jobs tomorrow.

Dar

August 14, 2009 1:52 PM

I for one definitely fall into the category of rushing in to get my share of the $4500 boondoggle before the money ran out. And it was in fact an acceleration of a replacement I had planned for 2011. I believe some analysts are correct in that this did little to give core stimulus to the economy but just moved future purchases into the here and now. This does not bode well for the auto industry over the next year or two.

Squeezebox

August 14, 2009 2:17 PM

How does cash for clunkers hurt the poor Karl? It just takes the cars with the worst gas mileage off the used car market. Cars with good mileage will still be on the used car market. Poor people would rather buy cars with better mileage anytime. Or are you talking about the poor oil executives who will have less sales?

Eric

August 14, 2009 2:46 PM

I went and was unqualified because I bought my "clunker" in April. Why do you have to have registration and insurance for a year? Yes, I understand because then people would buy a clunker then trade it in right away. Makes sense!!! But they need to move the day for eligibility the day before the PROGRAM started and they would have better success with the extra 2 Billion!!

Dar

August 14, 2009 4:21 PM

Case in point: My 12 year old Van was running beautifully, and the only age affects were the start of some rust in non-critical areas, a somewhat dirty interior (!), and a small drop in fuel economy. How were the poor hurt? I was going to donate it to a charity but I was not about to pass up $4500. So yes, this program has hurt the poor because of the requirement to destroy the vehicle.

Steve

August 14, 2009 6:58 PM

@Squeezebox:
Supply & demand at work. Poor folks probably would prefer to buy cars with better mileage. But those cars are more desirable so they cost more. You won't find a whole lot of Camrys or Accords at the bottom end of the market (under $1000). And reducing the supply of cheap POS's like older Explorers will drive prices up on those, too. It will also drive up the prices on used parts since the clunkers are being destroyed, not parted out.

Ken

August 14, 2009 11:02 PM

I think that there needs to be a review of the program and a shift to simply providing incentives for cars and trucks that get more than 20 MPG on the City side.

Say a $2,000 incentive for 20 MPG, increasing $100 for each MPG over 20. A 25 MPG car would get $2,500.

And forget giving trucks a major break. Take an empty fuel efficiency for the City standard, but there is a need to re-look at the need for a huge truck when a lighter one would do.

Traded my CLUNKER

August 15, 2009 11:06 AM

The dealers know that they have the upper hand now and are not offering the big incentives they once did and the people realize this.

Sleepy

August 15, 2009 2:37 PM

I had a vehicle that qualified but I would not really gain anything because the blue book for my van was higher than the $4500. I would have been ok but the dealer refused to negotiate on the msrp of the vehicles I was interested in. Suppy and demand I guess.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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