Cash for Clunkers

[The Tim]

[vermillionsky]

[TJ_98370]

Mish and Edmunds.com have a point. My personal situation is that we don't need or even really want a new car, right now. The reason I was drawn to investigate the program was because of the "free money". Who am I to criticize the government if it wants to give me money. If we do eventually participate in a taxpayer subsidized purchase of a new car right now, it will be in lieu of a non-subsidized purchase later on.
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If I am representative of typical CARS participants, all the program is doing is mashing a few months of future car sales into a few weeks right now, all at the cost of a few billion taxpayer dollars.

[rose-colored-coolaid]

I don't think this analysis is entirely spot on. In my personal dealings, I know people who seem to exclusively own newer cars (cars with payments in other words) and people who own older cars, generally with no payments. I would guess there is actually only a small subset of the population who a) generally buy new cars and b) have a car old enough to be swayed by cash-for-clunkers.

In other words, I doubt most of the people cashing in right now would have been in the market for a NEW car in two years anyways. Oh, they might have wanted a new 2001 car, but probably not a 2011 NEW car.

Mish is right though, that these purchases will offset later demand, but I think the demand that will get most squashed is resale demand. If the people who usually buy 5+ year old used cars all have new cars, who will buy tomorrow's used cars? My guess is the net effect will be more subtle, people who want to buy a new car in 5 years will need to wait because they won't get enough in resale, not because their demand is actually any lessened.

[WestSideBilly]

Rose, based on my friends/acquaintances/relatives who've taken advantage of it, I'd say you're correct. Many of them are not new car people, but have a used car worth very little in terms of book value, that becomes worth $7-9k (CARS + Manufacturer matching) and makes a new car a financially appealing purchase. A friend traded in an old GMC pickup with a bad transmission for a new Chevy pickup for a net cost of about $10k. But he would have fixed it up without the CARS program.

[jon]

The demand is not being compressed, because the cars traded in have to be destroyed. The people who would have been buying the traded in cars will have to buy a car that does not qualify, thus driving up the cost for those people, and that demand goes up the ladder until someone else who would have bought a used car ends up buying a new one.

As with corn ethanol, the result of a government program touted as a way to reduce emissions does the opposite, and simply increases costs for lots of people.

[TJ_98370]

The program will be very tempting to those families that have an older second or third vehicle that qualifies.
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FWIW, I just read that the best selling vehicle in the U.S. for the month of July 2009 was the F-Series Ford pick-up, which is hardly considered an econocar.

[rose-colored-coolaid]

[deejayoh]

You know, if they had the same sort of program for housing - it might actually help... cash for teardowns.

[TJ_98370]

A couple of MotorTrend articles are linked below. They provide details on July 2009 vehicle sales and other related info. It appears Ford is back in the black for now (Go Ford!). Hidden in the obfuscated percentage quotations and despite the CARS Program, the fact is that in raw numbers full-sized pickups are still the most popular selling vehicles in the U.S.. That little detail speaks volumes with respect to how much American consumers care about fuel efficiency and associated environmental / non-renewable natural resource issues.
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.....It's worth noting, though, that in terms of raw sales numbers, the winners for all three Detroit automakers were, once again, the pickup trucks. The Ford F-Series remains the sales king at 36,327 units with the Chevrolet Silverado coming in second at 27,617. The Dodge Ram again finds itself in third place with 17,723 copies sold.......
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[jon]

[rose-colored-coolaid]

[TJ_98370]

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We like our '93 Explorer too much to treat it with such disrespect......
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FORT WAYNE, Ind. (Indiana's NewsCenter) – Car dealers say the federal "cash for clunkers" program is a huge success, but what happens to your gas-guzzler once it's traded in?
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Dealers say the cars are placed in "clunker row" where they wait to have their engine oil drained and replaced with liquid glass.
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The solution kills the engine and dealers write the cruel words "Junk automobile, Cars.gov" on the car's title.
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Federal officials require the cars to be destroyed within 180 days for the dealerships to receive the money for the clunker.
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If the car was traded-in in Fort Wayne, the vehicle is then sent to Omni Source to be crushed.
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"There's been some nice looking cars," said Omni Source Plant Manager Dave Stages. "We're glad that the cars come in with the motor disabled. Because there have been a lot of people that say hey can I get this car or that car so it's been great that the motors destroyed and we can try to get them processed as soon as possible."
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Once the car is crushed omni source officials give dealers a certificate that says the car has been destroyed.
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Dealers then mail the certificate to federal government officials who approve the process and send the dealers a check for the clunker.
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[S-Crow]

Cash for Clunker update:

Some Subaru and Hyundai dealers from Burlington to Olympia are placing 2nd stickers and today I actually made an offer on a Sonata that was exactly invoice before rebates and it was rejected by ....exactly the rebate amount from C4C. I asked the salesperson how they arrived at their number and if car prices had miraculously risen by exactly the Cars.gov rebate amount in the last two weeks. Keep getting the old line of "you're never going to see deals like this again when the program is over." I heard that line, last Friday and it was back in business the following morning. Also have heard: "supply and demand, dude." Reminds me of all the real estate hype. Car bubble anyone?

Had a Subaru dealer in Olympia quote me MSRP $30K for a VW TDI that I could get for FAR LESS at Campbell Nelson in north Shoreline. I asked the Olympia Subaru dealer how much the car was two weeks ago....he said they raised the prices. I always liked the arrogant line "good luck with your finding a better deal." I asked the Subaru dealer at Bowen Scarff in Auburn about a Subaru and they give you the straight up deal price and didn't play the 2nd sticker BS or the magic increase in car prices. The guy there said he knows it is going on all over. Consumer's beware. Dealers are getting bailed out v2.0. The last time I was at a dealership to buy was 14 yrs ago to buy USED not new. I've met a few buyers who have similar situations as myself.

Good luck with that sales strategy dealers! You'll get a bunch of consumers now to pay MORE than retail at MSRP thinking they got a reduced price, but you've just alienated a whole group of very qualified buyers (who would never consider a new ride without C4C) who noticed the 2nd sticker BS arriving on the car window glass that was absent just two weeks ago. Sales are going to fall off when this expires and you'll see heavy incentives by the industry that will try to keep the buying going. I think this short term spike is really going to do a number on the car industry this Fall and Winter, perhaps setting the stage for some longer term problems. But, that's just one guys opinion.

[WestSideBilly]