Doesn't this CARS program apply to Toyotas too? I'm renting a Camry now. Superb vehicle for the price.
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The CARS program does apply to Toyotas also.
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We are going to look at a new 2009 Ford Escape today. The dealer is advertising a price of $13K with the CARS rebate. It's about the same size as our 1993 Explorer Sport (the Sport is the shorter two-door model) and the four cylinder, front wheel drive Escape gets 7 mpg better gas mileage overall. Maybe we'll check out the Escape hybrid, while we are at it. Final decision will be heavily influenced by the WAF (Wife Acceptance Factor).
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We checked out the Escape. There were like a total of four customers on the lot when we were there and we were two of the four. They had one, a grand total of one single solitary Escape on the lot, and of course they could not sell it to me for $13K, it was more like $14.5K. She did not like the interior color and it had an automatic transmission. She wants a manual transmission, so I am off the hook for now while she thinks about it. I think it is probably still a good deal for someone who really likes the Escape.
The salesman said something interesting about the CARS program though. He said that only about 1% of potential customers would / could qualify for the program. He did not elaborate as to where he got that percentage, but that figure seems awfully low. He did say that he had one potential buyer who wanted to buy a new Ranger, but his trade in did not meet the CARS gas mileage standards and he had two other customers who inquired about the CARS program but their trade-ins had values exceeding $4,500.
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I inquired about that program as well. If anyone does have a car that qualifies, be certain that you start your negotiations at invoice price working towards a lower price in your favor. I visited a couple dealers over the weekend in between some family obligations and the dealers are focusing on all incentives (dealer, manufacturer and cash for clunkers) off of MSRP. You need to negotiate price first, then incentives .
Do your homework. I'm noticing in some forums that people are sharing their prices and some are doing quite well.
One interesting site to use for values other than Edmunds.com is Truecar.com. The invoice price of vehicles on Truecar are very very close to Edmunds but they take it a step further and utilize actual sold data and show you actual dealer acquisition costs including dealer holdback from manufacturers.
My wife is currently considering the Hyundai Sonata GLS and looking to buy for around $12,500 + TTL including all rebates ($22K MSRP). She is also considering the Mazda 6 i Grand Touring, for about $19K+TTL (MSRP $30K fully loaded with NAV).
We would never consider a brand new car without the $4500 incentive for a clunker. But it is definitely getting me to inquire. Mazda had a zero percent incentive through Chase for 36 mos as well. 0% leverage is something I'd consider.
My husband has a 2001 Escape, and we both love it. Big enough to haul stuff, but not huge. It gets better mileage than my 1999 Taurus, and is more comfortable to drive/ride (more leg room & higher seats).
I was hoping to trade my Taurus in for something new this fall, but it doesn't qualify. fueleconomy.gov says it gets a combined 19 MPG, but I don't think that number is accurate.
In the first place, his final statement is a subjective one, showing a clear PERSONAL OPINION, which cannot be objective. He maintains the Corvette is "better" yet doesn't provide the slightest bit of objective data to back up his assertions. Statements without supporting data and worthless.
Show me the objective data to back up his assertion.
He has shown NO proof whatsoever. All he has told me is that he values certain items in a car differently than I do. It's his SUBJECTIVE opinion that the Corvette is "better" for these reasons.
I maintain that I think the E-Type is a "better" car for other reasons.
Both are subjective opinions based upon objective qualities of the car that each of us values at a different level.
I thought I was pretty specific with objective data, and I provided some numbers. Sports cars are transportation devices which are supposed to be fun to drive. The Corvette accelerates, brakes, handles, and rides better than the E-Type. It consumes less fuel and produces fewer harmful emissions, and is much safer in the event of a collision with another object. It is larger, has more driver/passenger room, and a larger trunk for storage. It is more reliable. All these aspects of a car are quantifiable and can be proven. Thus, as a transportation device and as a sporting vehicle, it is better.
The principle subjective assessment, styling, could go either way (a lot of people really like the look of the Corvette, some don't - same with the E-Type). Same with the intangible "passion" factor - most people who like them are passionate about them. But these are subjective measures which there is no objective measurement for, and quantifying them is impossible.
So, I'll say it again. The Corvette is a better car, because it does all the car things better. The human side of the transaction is impossible to quantify and is weighed differently by different people. "I would rather own an E-Type because it is a great looking vehicle that I enjoy driving more" is completely valid; "The E-Type is better" has no merit.
The automakers are failing for a reason. They should have let them fail, so we could go through the inevitable pain and come out the other side with a better business that works without nonsense government intervention like this worthless CARS program.
</rant>
As I've said before, I still believe $FC is meant to help the dealers, NOT the manufacturers. Or perhaps less so the manufacturers. Dealers live and die by volume, and volume is down 30-50%.
However, if you replace "automakers" with "car dealers" your point is pretty accurate. There are too many dealers, and they were propped up in the 90s and 00s with incentives and bogus financing, which drove up sales volume to unsustainable levels. The domestic dealers in particular need to be thinned.
. "Cash for Clunkers" Suspended for now?
. The government plans to suspend its popular "cash for clunkers" program amid concerns it could quickly use up the $1 billion in rebates for new car purchases, congressional officials said Thursday.
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The Transportation Department called lawmakers' offices to alert them to the decision to suspend the program at midnight Thursday. The program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle........
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.......A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.
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"There's a significant backlog of 'cash for clunkers' deals that make us question how much funding is still available in the program," said Bailey Wood, a spokesman for the dealers association.
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Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote in a letter to House leaders on Wednesday requesting additional funding for the program.
. "This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn," Miller said Thursday. "The federal government must come up with more money, immediately, to keep this program going."......
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The government's "trial balloon" is over. Turns out the CFC program was just a strawman for a new program called "Cash for Dumps" (CFD).
Rules are as follows:
1) House had to have been bought between 2004 and 2007
2) Had to have signed up for a "risky" loan (Alt-A, Subprime, Reverse, etc.)
3) Sale price had to be more than $1 Million
4) Current value has to be 30% or more off peak value
5) You have to work for "too big to fail" Bank or Wallstreet firm or....legislative/executive branch of US govt (grandfather clause applies all way back to 2000)
Amendment: If you qualify for 5) then 1) thru 4) not required.
If you qualify for the CFD Program you will be given $1M tax free with no questions asked.
If you don't qualify you will still win a free Zune in stunning cigarette brown and a free copy of MS Vista (dump edition).
Pretty straightforward, inherently fair, and helps strengthen the principles of democracy and capitalism in this great country!!!!
:twisted:
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KIRO 7 News Video:
. Cash for Clunkers Running on Empty
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I like the the suggestion to do "Cash for Cluckers". A chicken in every pot type thing (watch the video).....
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Michael J. Jackson, chief executive of AutoNation Inc. said "It was an absolute success. There's a very compelling case the government should put more money into it. It's a great stimulus to the economy."
Actually a very compelling case can be made that the CEO of AutoNation is an economic illiterate. All the program does is shift demand forward. Those clunkers were going to die at some point. Now sales are up this year which will cut into next year's demand, at the expense of everyone not getting free money.
Why anyone should be surprised at the "success" in generating demand for free money is beyond me. There is always demand for free money. Yet, interestingly, everyone seems surprised by the "unexpected success".
If the government wants more "success", it can give everyone $4,500 for a car. Short-term demand will soar. But long-term demand for cars would crash for the next few years, taxpayers would be stuck with the bills, and valuable resources would be wasted on cars rather than productive assets.
Thus, the "absolute success" touted by AutoNation is in reality a tragedy. Handing out free money always is. Indeed, the more free money handed out, the bigger the ultimate tragedy. The housing crash is poof enough.
The CEO of Edmunds.com seems to agree with that view of C4C, except he claims it also reflects delayed sales that would have taken place earlier: http://tinyurl.com/n7xq7e
I love a good sales surge as much as anyone. But it's not that simple. First, it's not clear that cash for clunkers actually increased sales. Edmunds.com noted recently that over 100,000 buyers put their purchases on hold waiting for the program to launch. Once consumers could start cashing in on July 24, showrooms were flooded and government servers were overwhelmed as the backlog of buyers finalized their purchases.
Secondly, on July 27, Edmunds.com published an analysis showing that in any given month 60,000 to 70,000 "clunker-like" deals happen with no government program in place. The 200,000-plus deals the government was originally prepared to fund through the program's Nov. 1 end date were about the "natural" clunker trade-in rate.
Clearly, cash for clunkers was underfunded from the start. Consumers quickly figured that out and rushed to take advantage before funding ran out.
This sales frenzy was inevitable. We have crammed three to four months of normal activity into just a few days.
What everyone fails to realize is that once this backlog is met, interest in the program will fade.
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.
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.
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.
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.
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.
The demand is not being compressed, because the cars traded in have to be destroyed.
First, if you look at the analysis (? anecdotes??) the suggestion is that demand is being compressed for reasons entirely unrelated to the actual lifespan of a motor vehicle.
Second, destroying the old car has little bearing in upcoming auto demand. Here's the world's simplest scenario. I am the only car owner in the world, I buy a new car every 10 years on the dot, and I've owned my current car 9 years. All the automakers are salivating about selling me a car NEXT summer. But with cash-for-clunkers, I run out and buy a new car this year instead, even though I've owned this car only 9 years.
Everything else being equal, it's clear that my demand next year is siphoned off this year. It doesn't really matter what you do with the old car, I won't want a new one for several years.
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.
. .....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.......
. Biggest Winners and Losers, Clunkers Edition: July 2009 U.S. Auto Sales
. July Sales: Cash for Clunkers Spurs FoMoCo; Toyota Regains Second-Place
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Everything else being equal, it's clear that my demand next year is siphoned off this year. It doesn't really matter what you do with the old car, I won't want a new one for several years.
In your example, your car consumption was 0.1 cars/year. Your latest car was destroyed with 1 year of life left, and then presumably you will now go back to 0.1 car/year.
Similarly for the overall economy. People are going to destroy cars with useful life in them. To meet the demand for cars, manufacturers will have to increase production to replace the lost car lifetime.
Everything else being equal, it's clear that my demand next year is siphoned off this year. It doesn't really matter what you do with the old car, I won't want a new one for several years.
In your example, your car consumption was 0.1 cars/year. Your latest car was destroyed with 1 year of life left, and then presumably you will now go back to 0.1 car/year.
Similarly for the overall economy. People are going to destroy cars with useful life in them. To meet the demand for cars, manufacturers will have to increase production to replace the lost car lifetime.
Yes, cars with some life left in them (hopefully very little) will be destroyed, but that spike in destruction will, presumably decrease future demand.
Let me expand the simple example a little. There are 120 people who each own one car, each of them buys a new car at exactly 10 years on the dot, with one car purchase a month.
CARS might encourage everyone with a 9 year old car to repurchase early, half the people with an 8 year old car, and one quarter of those with a 7 year old car. Under those assumptions, they would sell (and destroy) a lot of cars with some life left to them (capitalistically this is very wasteful). But, what's probably worst is that if everyone reverts to buying a car every 10 years, they've messed up the normal cycle of the market. Over the next 3 years (after the initial spike), only 1.25 years worth of total purchases would be made! Lots of makers might go out of business if that happened. Further, there's now a strange glut moving through the system; on the 10 year anniversary there will be another spike followed by a lull.
My example is truly simplistic, but it's a fact that spikes like this are difficult for businesses to adjust to (and the subsequent lulls are even worst).
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We like our '93 Explorer too much to treat it with such disrespect......
. WHERE DID ALL THE CLUNKERS GO?
. VIDEO
. 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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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.
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.
The F-series has been the number 1 seller for roughly 25 years, continuous, Chevy/GMC's equivalent has been #2. Work trucks, ranch/farm trucks, tow vehicles, etc account for a lot of the volume of vehicles sold. Many are leased (tax advantage for a business) and many are worked very hard (i.e. they're basically junk after 5 or 6 years).
As far as cars go, the Accord, Civic, Camry, Corolla, and Focus have been the top 5 in some order or another for around 8 years.
I always liked the arrogant line "good luck with your finding a better deal."
The last time I was told that I was shown the door by the manager of the dealership. I later drove to another dealership and negotiated $1500 off. Do they not know they aren't the only ones selling cars?
Comments
The CARS program does apply to Toyotas also.
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We are going to look at a new 2009 Ford Escape today. The dealer is advertising a price of $13K with the CARS rebate. It's about the same size as our 1993 Explorer Sport (the Sport is the shorter two-door model) and the four cylinder, front wheel drive Escape gets 7 mpg better gas mileage overall. Maybe we'll check out the Escape hybrid, while we are at it. Final decision will be heavily influenced by the WAF (Wife Acceptance Factor).
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The salesman said something interesting about the CARS program though. He said that only about 1% of potential customers would / could qualify for the program. He did not elaborate as to where he got that percentage, but that figure seems awfully low. He did say that he had one potential buyer who wanted to buy a new Ranger, but his trade in did not meet the CARS gas mileage standards and he had two other customers who inquired about the CARS program but their trade-ins had values exceeding $4,500.
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I inquired about that program as well. If anyone does have a car that qualifies, be certain that you start your negotiations at invoice price working towards a lower price in your favor. I visited a couple dealers over the weekend in between some family obligations and the dealers are focusing on all incentives (dealer, manufacturer and cash for clunkers) off of MSRP. You need to negotiate price first, then incentives .
Do your homework. I'm noticing in some forums that people are sharing their prices and some are doing quite well.
One interesting site to use for values other than Edmunds.com is Truecar.com. The invoice price of vehicles on Truecar are very very close to Edmunds but they take it a step further and utilize actual sold data and show you actual dealer acquisition costs including dealer holdback from manufacturers.
My wife is currently considering the Hyundai Sonata GLS and looking to buy for around $12,500 + TTL including all rebates ($22K MSRP). She is also considering the Mazda 6 i Grand Touring, for about $19K+TTL (MSRP $30K fully loaded with NAV).
We would never consider a brand new car without the $4500 incentive for a clunker. But it is definitely getting me to inquire. Mazda had a zero percent incentive through Chase for 36 mos as well. 0% leverage is something I'd consider.
I was hoping to trade my Taurus in for something new this fall, but it doesn't qualify. fueleconomy.gov says it gets a combined 19 MPG, but I don't think that number is accurate.
I thought I was pretty specific with objective data, and I provided some numbers. Sports cars are transportation devices which are supposed to be fun to drive. The Corvette accelerates, brakes, handles, and rides better than the E-Type. It consumes less fuel and produces fewer harmful emissions, and is much safer in the event of a collision with another object. It is larger, has more driver/passenger room, and a larger trunk for storage. It is more reliable. All these aspects of a car are quantifiable and can be proven. Thus, as a transportation device and as a sporting vehicle, it is better.
The principle subjective assessment, styling, could go either way (a lot of people really like the look of the Corvette, some don't - same with the E-Type). Same with the intangible "passion" factor - most people who like them are passionate about them. But these are subjective measures which there is no objective measurement for, and quantifying them is impossible.
So, I'll say it again. The Corvette is a better car, because it does all the car things better. The human side of the transaction is impossible to quantify and is weighed differently by different people. "I would rather own an E-Type because it is a great looking vehicle that I enjoy driving more" is completely valid; "The E-Type is better" has no merit.
As I've said before, I still believe $FC is meant to help the dealers, NOT the manufacturers. Or perhaps less so the manufacturers. Dealers live and die by volume, and volume is down 30-50%.
However, if you replace "automakers" with "car dealers" your point is pretty accurate. There are too many dealers, and they were propped up in the 90s and 00s with incentives and bogus financing, which drove up sales volume to unsustainable levels. The domestic dealers in particular need to be thinned.
"Cash for Clunkers" Suspended for now?
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The government plans to suspend its popular "cash for clunkers" program amid concerns it could quickly use up the $1 billion in rebates for new car purchases, congressional officials said Thursday.
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The Transportation Department called lawmakers' offices to alert them to the decision to suspend the program at midnight Thursday. The program offers owners of old cars and trucks $3,500 or $4,500 toward a new, more fuel-efficient vehicle........
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.......A survey of 2,000 dealers by the National Automobile Dealers Association found about 25,000 deals had not yet approved by NHTSA, or nearly 13 trades per store. It raised concerns that with about 23,000 dealers taking part in the program, auto dealers may already have surpassed the 250,000 vehicle sales funded by the $1 billion program.
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"There's a significant backlog of 'cash for clunkers' deals that make us question how much funding is still available in the program," said Bailey Wood, a spokesman for the dealers association.
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Even before the suspension, some in Congress were seeking more money for the auto sales stimulus. Rep. Candice Miller, R-Mich., wrote in a letter to House leaders on Wednesday requesting additional funding for the program.
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"This is simply the most stimulative $1 billion the federal government has spent during the entire economic downturn," Miller said Thursday. "The federal government must come up with more money, immediately, to keep this program going."......
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The government's "trial balloon" is over. Turns out the CFC program was just a strawman for a new program called "Cash for Dumps" (CFD).
Rules are as follows:
1) House had to have been bought between 2004 and 2007
2) Had to have signed up for a "risky" loan (Alt-A, Subprime, Reverse, etc.)
3) Sale price had to be more than $1 Million
4) Current value has to be 30% or more off peak value
5) You have to work for "too big to fail" Bank or Wallstreet firm or....legislative/executive branch of US govt (grandfather clause applies all way back to 2000)
Amendment: If you qualify for 5) then 1) thru 4) not required.
If you qualify for the CFD Program you will be given $1M tax free with no questions asked.
If you don't qualify you will still win a free Zune in stunning cigarette brown and a free copy of MS Vista (dump edition).
Pretty straightforward, inherently fair, and helps strengthen the principles of democracy and capitalism in this great country!!!!
:twisted:
This is an incorrect statement.
The House has passed more money, but there are rumblings in the Senate from people on both sides of the aisle to not let go of TARP money for this.
Heh don't knock the Zune, it's far superior to the ipod. It just not "hipster".
KIRO 7 News Video:
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Cash for Clunkers Running on Empty
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I like the the suggestion to do "Cash for Cluckers". A chicken in every pot type thing (watch the video).....
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You are correct. I heard "house" and wrote "Congress" for some reason.
The Senate is definitely balking at the extra $2B.
*#!& this @#$&;!!!
Ding ding ding. We have a winner.
The CEO of Edmunds.com seems to agree with that view of C4C, except he claims it also reflects delayed sales that would have taken place earlier:
http://tinyurl.com/n7xq7e
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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.
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.
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.
.
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.
First, if you look at the analysis (? anecdotes??) the suggestion is that demand is being compressed for reasons entirely unrelated to the actual lifespan of a motor vehicle.
Second, destroying the old car has little bearing in upcoming auto demand. Here's the world's simplest scenario. I am the only car owner in the world, I buy a new car every 10 years on the dot, and I've owned my current car 9 years. All the automakers are salivating about selling me a car NEXT summer. But with cash-for-clunkers, I run out and buy a new car this year instead, even though I've owned this car only 9 years.
Everything else being equal, it's clear that my demand next year is siphoned off this year. It doesn't really matter what you do with the old car, I won't want a new one for several years.
.
.....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.......
.
Biggest Winners and Losers, Clunkers Edition: July 2009 U.S. Auto Sales
.
July Sales: Cash for Clunkers Spurs FoMoCo; Toyota Regains Second-Place
.
In your example, your car consumption was 0.1 cars/year. Your latest car was destroyed with 1 year of life left, and then presumably you will now go back to 0.1 car/year.
Similarly for the overall economy. People are going to destroy cars with useful life in them. To meet the demand for cars, manufacturers will have to increase production to replace the lost car lifetime.
Yes, cars with some life left in them (hopefully very little) will be destroyed, but that spike in destruction will, presumably decrease future demand.
Let me expand the simple example a little. There are 120 people who each own one car, each of them buys a new car at exactly 10 years on the dot, with one car purchase a month.
CARS might encourage everyone with a 9 year old car to repurchase early, half the people with an 8 year old car, and one quarter of those with a 7 year old car. Under those assumptions, they would sell (and destroy) a lot of cars with some life left to them (capitalistically this is very wasteful). But, what's probably worst is that if everyone reverts to buying a car every 10 years, they've messed up the normal cycle of the market. Over the next 3 years (after the initial spike), only 1.25 years worth of total purchases would be made! Lots of makers might go out of business if that happened. Further, there's now a strange glut moving through the system; on the 10 year anniversary there will be another spike followed by a lull.
My example is truly simplistic, but it's a fact that spikes like this are difficult for businesses to adjust to (and the subsequent lulls are even worst).
We like our '93 Explorer too much to treat it with such disrespect......
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WHERE DID ALL THE CLUNKERS GO?
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VIDEO
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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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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.
The F-series has been the number 1 seller for roughly 25 years, continuous, Chevy/GMC's equivalent has been #2. Work trucks, ranch/farm trucks, tow vehicles, etc account for a lot of the volume of vehicles sold. Many are leased (tax advantage for a business) and many are worked very hard (i.e. they're basically junk after 5 or 6 years).
As far as cars go, the Accord, Civic, Camry, Corolla, and Focus have been the top 5 in some order or another for around 8 years.
The last time I was told that I was shown the door by the manager of the dealership. I later drove to another dealership and negotiated $1500 off. Do they not know they aren't the only ones selling cars?