REPORT: Cash for Clunkers could be dead
by AutoblogGreen Staff on Jul 31st 2009 at 1:17AM 
Congress allocated close to $1 billion for the Cash for Clunkers program. That's billion with nine zeros. And all that money might be gone by midnight tonight. This, according to reports by both the Detroit Free Press and Edmunds AutoObserver. We learned earlier that the C4C program has proved to be much more successful than initially thought, with 22,782 consumers taking advantage of between $3,500 to $4,500 federal duckets for their old "clunkers" during the programs first five days. In fact, so many people are taking the feds up on the deal that dealers are worried they are going to lose track of all the trade-ins. The Department of Transportation (DOT) could announce the suspension of the program as soon as tonight. In fact, they could announce that all the money is gone and the program is over. We gotta wonder what John Maynard Keynes would make of all this.
UPDATE: As of 9:41PM EST Friday, the Detroit Free Press is reporting that White House administration officials alerted Congress this evening that the Cash for Clunkers would be suspended, though White House officials have denied the report. Confusion is running rampant at this point, but it seems that the $950 million allocated for reimbursement of passenger car and light truck rebates is all but gone and government officials will spend Friday figuring out how to find more money for the program and untangle the reimbursement process for dealers.
[Sources: FREEP, AutoObserver | Image Source: Theo Heimann/Getty]
Reader Comments (Page 1 of 1)
rob 7:38AM (7/31/2009)
Pardon my confusion, but isn't 22,782 rebates at $4500 about $102.5 Million? Where did the other $900 Million go? Bureaucratic waste?
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Matt 10:21AM (7/31/2009)
That's exactly what I did... there should be at least 222,222 trade-ins if every dollar of the $1B program goes to rebates. That's 222,222 if every trade took maximum advantage at $4,500 each; there should be more trades than that since not everyone will get the maximum rebate.
contact 8:39AM (7/31/2009)
No the dealers (myself included) have a back log of claims they can't process online due to the heavy traffic to the website. They Estimate the back log of claims will exceed the budgeted amount. They are going to suspend NEW claims until these are caught up and then see where to go from there.
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Marion 9:08AM (7/31/2009)
Wait, I heard that the dealers called the suspension, and that the money wasn't quite out, but they wanted to make sure that back-logs were processed first before creating more deals.
If nothing else, the fact that there's such a response can only be good for the economy, right? However, with many people replacing cars now, wouldn't that create less sales down the road, when they would've bought new vehicles in the first place? Now those people don't have to. With the new CAFE, would it be surprising if the next few model years get substantially better mpg than this year and last year's models? Anyway, I can't wait to see sales numbers.
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TeddyFrank 10:12AM (7/31/2009)
Well Hell,
This is great news. I thought that the program would exhaust its funds in a couple of months. The question is, why on earth did they reduce the allocation from $4B to $1B?
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rob 10:21AM (7/31/2009)
So the backlog is 9 times higher than the processed claims?
I decided to use a bit of critical thinking here and now realized the cash for clunkers is essentially meaningless (at least as a boost for the auto industry). The total outlay of money works out to around 210,000 vehicles that will be traded in. At our currently extremely horrible sales rate of 9.5 million (compared to 17 million about 5 years ago), that's only a 2% sales increase. I would think a well run marketing campaign for a brand could generate that short term increase. I also seem to recall reading that there is a noticeable sales uptick at dealerships when a brand wins one of the NASCAR races.
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Throwback 10:31AM (7/31/2009)
Excellent points. also that marketing campaign would not use tax dollars. There is no way to know if this program brought in buyers who would not have bought otherwise. Or, if folks simply waited until the plan was inacted and then decided to buy. That is what my uncle did. He was going to replace his 20 year old F150 that has been sitting in his driveway for the last 2 years getting barely driven. Now he is looking to buy a car for my cousin which will be driven daily. CFC or not, my cousin was getting a new car.
polo 12:09PM (7/31/2009)
"I would think a well run marketing campaign for a brand could generate that short term increase"
A marketing campaign can boost sales by 200,000 in a week? I don't think so. If what you said was true then two of the biggest automakers wouldn't have gone nearly bankrupt - they would have pushed huge advert campaigns instead of letting industry sales slide almost 50%. $5Billion would a 10% boost in industry sales - though even less than half that is definitely not "meaningless" in an industry where the government had to take over companies due to stagnant sales.
The program is considered a success, particularly because people are trading in SUVs for efficient cars, and traffic to dealers is increasing. Its going to extended, and it shows that buyer incentives can push strong sales of efficient autos (no gas tax needed).
rob 12:35PM (7/31/2009)
"A marketing campaign can boost sales by 200,000 in a week? I don't think so."
I was going more for the percent increase, 2%. Since the CFC is a one-time thing the net effect is pretty minor. For this week only, the car sales increase will be at least 210,000 and perhaps more. Keep in mind that a 9.5 million sales rate, that means about 157,000 would normally be sold. It will be interesting to see where the number for this week comes in: 210,000 or 367,000. Then I would watch the next few weeks after that and see if they dip below the average sales rate.
As was pointed out by Throwback, I suspect a lot of these vehicles turned in weren't daily drivers or were on their way out anyway. I was originally considering taking advantage of it, but my trade-in vehicle just missed out on the mileage requirement. Now that vehicle is still on the road and will continue to be used from time-to-time.
If the real intent of the legislation is to get the polluters off the road perhaps a better piece of legislation is that for a new vehicle to be registered a poorer performing vehicle has to be taken off the road. Permanently taken off the road and not just resold by the dealer or at auction.
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Eronne 12:18AM (8/07/2009)
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
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