I humbly stand corrected. When I heard the rules and limitations of the Car Allowance Rebate System, or Cash For Clunkers, I wondered how effective the program would be. It sounded like it was a great idea that got bogged down by politics. Well it seems I was wrong. Cash For Clunkers is already running out of money!
Reports are that the Transportation Department has instructed car dealers to stop taking applications for the CARS program. Yup, the Cash for Clunkers program was a success. In fact the program has only officially been in place since July 24th though dealers have been accepting applications since the beginning of July. Enough applications have already been received to account for $1 billion.
The CARS program was expected to run until November 1st or until cash ran out. One billion was set aside for the Clunkers program. Let’s do a little math. Let’s assume the average credit for a clunker is $4000 (right between $3500 and $4500). Take $1,000,000,000 and divide that by $4000 and you get 250,000 cars that have had applications accounted for already. One month and a quarter of a million cars! This may very well be the most successful stimulus program to date!
The Wall Street Journal reports that Ford has received over one million unique visitors to it’s Cash for Clunker site while GM has received 750,000. According to a JD Power and Associates forecast the CARS program could account for an additional 110,000 new cars sales from people who weren’t already looking for a new car. For an industry that has taken a beating lately, and for some almost ceased to exist, the Cash for Clunkers program has been a great stimulus!
But what now?
Robert Gibbs, the White House Press Secretary says that all valid CARS applications already turned in will be honored. But the program needs more money allocated to it in order to continue. The Obama administration needs to convince congress to add more money to the program to keep it going. One place the administration may look to tap money is the Troubled Asset Relief Program (TARP). Should this money be used to stimulate cars sales? Should more tax money be used?
Certainly taxpayers don’t want even more money set aside for stimulus programs. But if the success of the Car Allowance Rebate system continues it would help not only car companies but also Federal, State, and Local governments with tax money collected from the sales of vehicles. It will help keep many dealers afloat at a time when automotive companies have been closing dealerships and unemployment in general has been on the rise.
Update: The House of Representatives has voted to give an additional $2 billion to the Cash for Clunkers program. Senate will have to vote next week for the additional funds to go through. It looks like there’s momentum to keep this program rolling.
How do you feel about the success of the Car Allowance Rebate System?
photo credit: Tiago ? Ribeiro
{ 13 comments… read them below or add one }
It’s a success, only in the loosest way.. yes, they succeeded in spending a ton of taxpayer money on the program, but it isn’t a success in that there are a ton of car dealers that are now having cash flow problems because they’ve approved too many CARS deals on their end, but now are waiting for the un-ending government delays for approvals on their deals. Tons of government red tape, some deals being rejected (on deals where cars were already destroyed) means that the program is becoming a fiasco on the administrative end.
Next up? Health care..
.-= Bible Money Matters´s last blog ..Cash For Clunkers Program Suspended After Only A Few Days. Here Is Why =-.
“110,000 new cars sales from people who weren’t already looking for a new car”
Nice find.
.-= PT Money´s last blog ..Cash for Clunkers Program May Get More Funds – But is the Program Good for Consumers? =-.
Yea it really is working because I see people around me actually buying cars now solely because of this credit. At last something has some positive impact lol.
.-= Hiro @ my10000dollars.com´s last blog ..Karl Denninger – Tickerguy on High Frequency Trading =-.
From what I’ve heard and read, the dealers are getting hurt because they make their money from selling used cars. That’s where the dealers profits come in and this program requires the dealers to “kill” the cars that are traded in.
.-= Jason @ Redeeming Riches´s last blog ..How Much Money Do You Need to Retire? =-.
I would think that the cars being traded in weren’t worth more than the credit anyway. And these days dealers may be happy being able to move units. And there has been evidence that the CARS program has spurred sales from people who don’t use the credit as well.
My understanding of this program was that it was intended to get people out of their low gas mileage cars and into more cost efficient cars. I never really cared about the boost to the car industry, because America lost, plain and simple. I’m as patriotic as they come, but Japan kicked our butts when it came to producing quality cars and making sound investments. The car industry is a sinking ship, and if we are going to come back, we need to rebuild it from the ground up.
As for whether or not the program was a success, we should, as a nation, have a lowered dependency on foreign oil, due to the better gas mileage in the average car. I’m a believer in supply and demand, and since this program ran it’s course so quickly, I am in favor of another go. I don’t think that “Cash for Clunkers” should cycle endlessly, but it’s obvious that a lot of people wanted in on this, and it’s obvious that a lot of people still want in on it. And since people are wanting in on this, then it would be a good use of tax dollars, instead of some of the other proposed stimulus ideas that people are less keen on.
.-= Trey – Swollen Thumb Entertainment´s last blog ..Why I Love Game Shows =-.
I think there is an intention to help out environmentally but I think the standards are a bit low to make a lasting impact. I think it turned more into a stimulus for the auto industry rather than an environmental boost.
But the fact that so many jumped on the program and auto makers like Chrysler now have inventory issues shows there is a demand for CARS. I’m ok with them extending it but as you say it needs to have a definite end point.
I’d also like to see some new standards in place for environmental requirements from all dealers to have better mileage and lower emissions as well as incentives for oil independence.
Since I don’t have a car nor will be getting one soon, I haven’t paid attention to the details of C4C. But I sincerely hope all the new cars bought were *severely* more energy efficient and that at least a lot of them were hybrids. Otherwise it seems the whole thing is a huge waste. The U.S. needs to transition away from a car-based society and invest more in public transit – just go to inner Europe if anyone has any doubts about how crazy efficient it can be. Remember, it was GM who lobbied to get all the streetcars taken away in the first place, almost 100 years ago….
.-= MoneyEnergy´s last blog ..What To Do With Your Money Just In Case Trends Forecaster Gerald Celente Is Right =-.
I doubt most of the cars were severely more energy efficient. If I recall some of the SUV and truck rules the new car may only have had to be 1 or 2 MPG better. This isn’t a strong environmental plan. It’s a stimulus dressed up like an environmental issue.
Does anyone know if we can trade our congressmen in under the cash for clunkers program?
But seriously, this program is such a bad idea… it sends the wrong message (the gov’t will subsidize your purchases), it creates another bubble (what do you think will happen to auto sales when the program ends?), it’s yet another $3 billion in new debt and it hurts those in the lower income bracket (trade-ins must be destroyed, so there will be less used cars on the secondary market).
.-= Mike´s last blog ..Cash For Clunkers: A Bad Deal for Americans. =-.
Interesting point on used cars and lower income. But I don’t know that this will create a bubble in the sense of housing or the internet that we’ve had in the past. It helps dealers who have already been slow and shutting down build up their business and helps auto manufacturers sell off their inventory.
I don’t think it’s the best plan by far. Hopefully the auto dealers understand that this is only a temporary push and isn’t long term. They need to use this time to push their better fuel efficient cars and take that momentum to continue sales afterward.
What do you think will happen to auto sales after the C4C program ends?
.-= Mike´s last blog ..Cash For Clunkers: A Bad Deal for Americans. =-.
Only $1billon out of $4billon is set aside for the project and now the program, along with car dealers, suffer a lot. And there are so much trouble for the car dealers to be refunded, this cash flow problem may slow them down in implementing the program.
Any further discussion is welcomed
.-= eronne´s last blog ..Cash for clunker recall =-.
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