Analysts: There's no guarantee that cash-for-clunkers will really drive car sales
Now that the cash-for-clunkers bill is ready for the President's signature, attention is turning to how much of an impact the negotiated bill will actually have on car sales. There are a lot of positive stories about the bill floating around - headlines say the bill might "jumpstart US auto sales" and claim "Has Uncle Sam got a deal for you." But will the law, with its fairly tight requirements, really stimulate sales? Some auto analysts don't think so.
Four analysts interviewed by Automotive News (subs req'd) estimate that only 70,000 to 200,000 more vehicles will be sold because of the clunkers bill. There are three main factors limiting the bill's impact:
- It's just four months long. The law will only offer the cash for your clunkers from the first of July until November 1
- While the bill requires the new vehicle to be more fuel efficient than the one you're trading in, the 18 mpg limit on the old ride (details here) doesn't encompass nearly enough vehicles.
- The economics of the law don't make a lot of sense in the real world. If you're driving an eligible car, then chances are that you can't afford a new vehicle right now - even if you can subtract $4,500 from the price. More often than not, it makes more sense to just buy a used car.
Photo by KB35. Licensed under Creative Commons license 2.0.
Reader Comments (Page 1 of 2)
Woodenbee 10:19AM (6/22/2009)
well its been so watered down and tailored to fatcats that its utterly pointless, its just another war contractor handout, like the taxbreak for "farmers" to write off their $60K hummer, it looks like unless your trading your supercab dually 6.9 litre for a kingcab 5.9 Tundra you probably wont qualify, WTF!!
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ale 11:00AM (6/22/2009)
foihghdespbgephbfra[ politicians, they always got to ruin a good bill for some dumb*** special interest.. this is was going to be a great bill, a bill that was going to help out mahindra, now they wont even be able to allow their customers to use this...
this is total bullshlt
jeffzekas 2:43PM (6/22/2009)
How does our bill compare with the German bill? I ask, because they (the Germans) have had... what?... something like a 20% increase in car sales, with their clunker bill. I agree with the other posters: there should have been NO age limit... just get rid of the polluters! However, the aftermarket parts industry opposed allowing older cars in the bill... a shame, because many late 70's US vehicles aren't worth keeping (you Crown Vic, Celebrity and Pinto owners know who you are!). Also, the cut-off should have been 20 mpg... heck, my '58 VW got 25 mpg in town, and over 30 mpg on the freeway! Personally, I'd like to get rid of my '96 Bronco (15 mpg/ 17 mpg) but it "only" has 170,000 miles... meaning, I COULD get a few more years out of it (I only drive my Bronco 7,000 miles per year... Consumers Reports says "Wait until your car has over 200,000 miles). Also, it is too bad this bill didn't allow folks to buy a "newer" used economy car, say a 2004 or newer Prius or Corolla or Focus... Me? My dream car is a Fusion Hybrid or a 4WD Escape Hybrid... but wifey says "Let's not buy a car right now... we have no debts, and who knows what will happen?" Anybody else in the same boat? And would a Lotus Elise qualify as "economical"?!!
ShaunneyCakes 10:37AM (6/22/2009)
There is no gaurantee the sun will set tonight. What is your point?
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Tim 10:57AM (6/22/2009)
The guarantee is that it will drive America and Americans further in debt.
Keynesian Statists, both the NeoCons and Democrat-Socialists are VERY good at that as long as they have UNLIMITED fiat debt-currency from the unFederal noReserve private Bank.
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Ernie 3:54PM (6/22/2009)
Tim, when I read your posts lately, I hear a song playing in my head.
It's "Bring on the clowns".
Tim 4:04PM (6/22/2009)
Ernie,
Yes, I'm trying to wake up "We, the people..." so we can throw out the CLOWNS in Congress who ignore their oath of office. Only then can the USA return to the rule of law and the Constitutional limitiations on federal power. Only then can we get rid of the current rule of the elite, rich, politically connected and powerful and return the power BACK to We, the People from which that power came.
And you wondered why things NEVER seem to really "change" no matter who is in office....
Paul 5:55PM (6/22/2009)
Tim,
You are so right about this bill. Most Americans are clueless about how far their country has strayed from their original constitution. This cash-for-clunkers is the exact stuff that the forefathers were against - a tax on everyone, to benefit a select few. I'm sure you know that American citizens are not even supposed to pay income taxes. Yet the Federal Reserve cartel literally steals this money from the American public on an ongoing basis. I'm not American (Canadian actually), but we've always benefited from a healthy America, so I actually care about stuff like this. And a debt-laden America is not the way to go. I think Americans should listen to people like Ron Paul, who pretty much equate all of America's financial ills to the Federal Reserve. Sign this petition and email it to your friends:
http://www.petitiononline.com/fedres/petition.html
snark mcgee 9:43PM (6/22/2009)
I'm not sure why you are getting downvoted for your comment. It is spot on.
once loved cars 10:59AM (6/22/2009)
This is how they could make the bill better:
-make any vehicle eligible no matter the mpg and make the mpg requirements sliding: what ever your car gets now 21 mpg, then you have to buy something with 31mpg or better. etc.
-have more than two tiers of cash - if you buy something with 10mpg+ greater than your clunker, you get $4500, if you buy something with 20mpg+ >, you get $9000. That could turn the biggest polluters into prius drivers.
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jpm100 11:07AM (6/22/2009)
I don't think the law is meant for used cars in mint or even fair condition. Its meant for clunkers. The ones with exhaust system leaks, oil leaks, etc. that make them borderline junkyard candidates. Its to get them off the road because a malfunctioning car is probably putting out magnitudes times the pollutants of the same car in fair condition. And those clunkers are likely older. And some of those older cars, the fair condition car is putting out magnitudes more pollutants. So you have cars out there putting out pollution levels on the order of hundreds of times what a modern fair condition car will put out.
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km 12:10PM (6/22/2009)
ppl driving wrecks likely cant afford new
stevejust 5:21PM (6/22/2009)
@km:
Okay, a lot of people in clunkers can't afford to buy new. No doubt. But the flip side is that a lot of people with money have cars that quailify for clunker status under this bill. My girlfriend's 1997 4Runner, for example, which might be worth right about $4,500 on the private market with its 140,000 miles -- is considered to be a GROSS POLLUTER by CA emissions laws. The 4Runner doesn't get driven all that much except when we need the space.
With the pasasge of this legislation is going to be cash for clunker-ed right into a 2010 Toyota Prius. We're going to lose of room by doing this, but between the $4500, the taking the GROSS POLLUTER off the roads, and the tax benefits of buying a new car this year, she'll come out way ahead.
I just wish there was an American car that gets 50 mpg and that we could trust to last for a while we could buy instead. (And yes, we've thought about the escape hybrid.)
Ghen 10:30AM (6/23/2009)
@km
With the limited funds available for this bill something tells me we're going to run out of money way before people run out of clunkers they want to trade in. So your point is completely irrelevant.
dave 7:25AM (7/08/2009)
The people who are driving these cars will not be able to buy a new car... IF they COULD afford a new car the ALREADY wont be driving these pieces of crap. This is just a way to get the Obama strangle hold more tightly on the US public. This guy is the closest thing to a dictator we have ever seen. HE will do anything to control the public. You better watch out, Obama wants to dictate everything about your lives. Smart grids, public transport, your weight vs your health care premiums... Get him out after this 4 years or the USA is gone!
lne937s 11:08AM (6/22/2009)
I bet a lot of Town Car and Crown Vic Taxi drivers will take advantage of this program here in NYC- it seems perfectly designed to help get those cars off the road.
And there are ~250 milion cars on the road (more cars than registered drivers), some of them must be in the situation to take advantage of this program. While this program is relatively small in terms of scope and funding, I am fully confident that it will acieve its modest objectives.
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Joe Bonaparte 12:38PM (6/22/2009)
My thoughts EXACTLY! If all the cabbies trade in their crown vics for fusion hybrids, they can pay less than half in fuel per month. minus $4500, would probably pay for itself.
bebop 11:16AM (6/22/2009)
I have been watching the CforC bill carefully as I have an '01 Chrysler T&C with 160k miles, in need of new tires and brakes and with a slight oil leak. I (think I) could qualify for the $4500 voucher which is more money than my van is worth on the market right now. I have no credit problems and could easily afford a new vehicle but my only conundrum is... there are no new vehicles out there that I really want. I would consider a new 2010 Prius in a heartbeat however, it is not my ideal vehicle (we really need a van) and would still end up costing me way over $20k - even with the voucher. Sure I could just buy a new T&C or other new van however, the increase in gas mileage would be negligible with one of these and I'd be stuck with yet another purely ICE powered vehicle that was obsolete the moment it had rolled off the assembly line - not to mention 4-5 years of car payments and continued bad news at the gas station if the price of gas goes up.... So... for my situation it's either bite the bullet and invest another $1k in repairs on the old van or opt for a used, newer than '01 van with less miles and hang on until the car companies get their technology together and produce a hybrid van...
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lne937s 11:40AM (6/22/2009)
bebop
take a look at the Mazda 5. It is reasonably priced and should make a significant improvement in your fuel economy.
I've driven a rental and it handled amazingly well for a minivan.
omnimoeish 12:11PM (6/22/2009)
I was really excited when I heard this. My car is worth about $2,500 if I'm lucky and I was really trying to justify a new car instead of a used one, but my car combines for 19 mpg. I too think it should have been a sliding 10 mpg improvement, I would love to buy a new Prius.