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Senate approves more clunker cash


The Senate approved another $2 billion for the “cash for clunkers” program by a vote of 60 to 37, but don’t expect the same mad rush of sales that dealers enjoyed when the program opened. First, dealers are already reporting that showroom traffic is slipping now that the initial buzz of the program has worn off. Plus, many of the deals that were reported once the program was enacted on January 20 were in the works all month as consumers flocked to dealerships in advance to make sure they got the cash. But now that consumers know there is another $2 billion on the way, they know it will last and won’t rush to get it, says Jeremy Anwyl CEO of Edmunds.com.

Then there is the problem with inventories. The Department of Transportation said Wednesday that 184,000 deals had been submitted, spending as much as $775.2 million of the first $1 billion if the are all approved. Car makers are starting to run low on some of the smaller, more efficient cars that qualify as purchases for the program. Chrysler, for example, got its inventory down to 40 days worth of cars, compared with 71 days of inventory at the end of June. The company doubled the $3,500 or $4,500 government incentive for scrapping an old car by matching with rebates of its own. Chrysler had big sales of smaller vehicles like the Jeep patriot and Dodge Caliber. The company also started to ratchet back on incentives on some models and its plants are now ramping up production. Ford also had a pretty low 50 days worth of cars on dealer lots. General Motors is also boosting production in the third quarter, but its inventories thinned out some as well.

While it’s clear that the clunker program helped sell a lot of cars, industry analysts and economists are now wondering how much of the sales are new. One intent of the program was to get buyers who traditionally buy used cars into the new-car market. Dealers say that in some cases, the customers coming in were families who have high school or college-age kids driving an older model. Clearly some buyers came out of the used market to take advantage of the government cash. But J.D. Power and Associates estimates that only about 20% of the clunker customers are new buyers, that is, people who would not have bought a new car this year. If that’s the case, then the industry has pulled some sales ahead and there could be a hangover for automakers and their dealers when the program ends.


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