• Aug 21, 2009
Despite a lot of skepticism from industry analysts, the "Cash for Clunkers" program exceeded just about everyone's expectations. It brought in new customers, cleaned out a lot of old inventory, and started putting auto workers back to work.
A lot of critics, me included, thought this was just a government giveaway that really wouldn't have much effect. And while there's no question it was a giveaway, it did meet the goals of the program: to help reduce America's dependence on oil and stimulate the economy.

Most impressively, dealers tell me that the Clunkers program brought in customers they had never seen before. They were people who would not normally buy a new car. The only reason they came into the showrooms shopping for new cars was because of the cash they could get for their clunkers. And the dealers are pretty sure they'll never see most of them ever again.
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John McElroy is host of the TV program "Autoline Detroit" and daily web video "Autoline Daily". Every week he brings his unique insights as an auto industry insider to Autoblog readers.
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This is why the auto industry is pretty sure there's not going to be any "payback" now that the Clunkers program is over. Typically car sales crash after a big incentive program, because all it does is sell cars to people who were going to buy one anyway. The incentive just pulls them into the market sooner. But that does not seem to be the case with the Clunkers program. It brought used-car buyers into the new car market.

Every auto job supports another seven to eight jobs elsewhere in the economy.
Moreover, dealers tell me they expect to see a slow but steady stream of customers coming into their showrooms going forward because there's a lot of pent-up demand out there. There are several million customers who could afford to buy a new car right now, and would have no problem getting any financing. But they're unsure about where the economy is headed, and some of them worry about holding unto their jobs. They're not about to plunk their hard-earned savings down on a big-ticket item like a new car. But if the economy starts to pick up, and consumer confidence rebounds, they'll be back in the market right quick.

Automakers also love how the Clunkers program cleaned out so much of their inventory of small cars. Now they're boosting production. GM, Ford, Chrysler, Toyota and Honda are all hiring back autoworkers and even adding some overtime. This is where we could really see the stimulus effect of this program. Every auto job supports another seven to eight jobs elsewhere in the economy.

And there's no question the vehicles that were traded in were far less fuel-efficient than the ones they were replaced with. Most of the clunker trade-ins were old SUVs, pickups and minivans, which were replaced with new compact cars.

Of course, not everything went to plan. There were some glaring snafus with the Clunkers program. The government website that dealers had to use to qualify cars for the Clunkers program was a nightmare to use. It could take up to an hour to enter all the data required to qualify one car, only to see the system crash and have to start all over again. And so far the government has only paid dealers a mere pittance of the money that they're owed. In fact, GM and Chrysler had to provide cash to their dealers just to keep them going until the government reimburses them.

But in terms of boosting car sales, reducing inventory, encouraging fuel efficiency, and stimulating the economy, the Clunkers program pretty much did everything it was supposed to do. All the dealers and car companies I've talked to are surprised and delighted by the results. And I have to confess, so am I.

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    • 1 Second Ago
  • 23 Comments
      • 5 Years Ago
      The government has absolutely no business messing with commerce in this way. +1 Matt
      • 5 Years Ago
      Focuses and Corollas for all!
        • 5 Years Ago
        I thought Matt already had rabies.
        • 5 Years Ago
        I'd rather have bird flu, swine flu, SARS, anthrax and rabies before I drive that POS Focus or any other small, anemic, cheap crackerbox car.
        • 5 Years Ago
        @PhattyDre16
        Why would you say 'or rabies'? It should be 'and rabies' for Matt.
        • 5 Years Ago
        @Matt

        I for one would love to see you with bird flu, swine flu, SARS, anthrax or rabies. I would die happy. : )

      • 5 Years Ago
      People say it is a good idea to negotiate the new car price before you tell the dealer that you have a clunker!

      Jimhenry
      Blogger
      www.cashforclunkersfacts.info
      http://www.cashforclunkersfacts.info
      • 5 Years Ago
      If this worked so well, which not Cash for Fridges? Cash for Flat Screens? Cash for Dishwashers? (I could use one of those). Cash for RVs? Cash for Couches? (I'm sure the furniture industry is hurting too, think of all the votes in the Carolinas)

      While this program may be a "success", it's a sure failure for the economic future of our country.
      Lawrence Phoenix
      • 5 Years Ago
      The program was a economic stimulus program and worked better then anyone could have hoped....GM is hiring 1400 new workers, Ford putting on new shifts, 800 workers called back in Tenn., our local GM plant is returning to 10/4's with Saturday overtime. In addition dealer's made out like porch climbers, salvage yard's never had it so good,etc....Did it cure cancer, flat feet or public flatulance ? Well no, but then it wasn't designed too but critics who would rather burn the country to the waterline then admit a Progressive administration did anything right would rather rewrite history about the Great Depression then give credit....
      • 5 Years Ago
      Can't wait for all the repo's to start in about a year. Really brilliant idea, lets take people out of paid off cars, that probably run just fine and could continue to run with minor repairs, and throw them into a new car with financing and added insurance.

      This was a short term solution that will bite the economy in the butt in about a year. Brilliant!
        • 5 Years Ago
        Having recently gone through loan approval for a mortgage, I can say that the lenders are being much more careful about who they loan to and how much. I suspect that the quality of these recent loans is much better than those written a few years ago. Probably the main risk for these people is that they might still be laid off. To prevent that, we need economic stimulation.... back to C4C.
      • 5 Years Ago

      The program requires the scrapping of your eligible trade-in vehicle, and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.

      Henry
      Blogger
      www.cashforclunkersfacts.info
      http://www.cashforclunkersfacts.info
      • 5 Years Ago
      I agree with balanced and Matt. How many of these vehicles do they expect to be repo'd? I personally saw approximately 100 "clunkers" on the back lot of a dealer. There were many good vehicles back there. I would like to have had some of them. Hot rodders and customizers would be drooling over the ones I saw. And the dealers say they are sure they'll never see these customers again. In other words, no repeat business.
      • 5 Years Ago
      Now Mcelroy has lost his mind as well. Pulling 4th quarter 09 and 1st qtr 2010 sales into 3rd qtr 2009 only means the manufacturers will be laying off people a few months later. Creating a car buying bubble helps no one. In fact, people are now going to wait even longer to get a new car because they will wait for better deals. Also, alot of the people buying small cars got them because that is all they could afford. It is quite possible the repoman business may be booming as well. Just like the house foreclosures.
      • 5 Years Ago
      Something else I noticed about C4C that may be suprising to some individuals. The fact that C4C is helping to reduce dependence on foreign oil may be slightly overstated in most reports because it does not take into account the resourcefulness of the American consumer. Although many have traded in thier truck/SUVs to purchase a more fuel efficient car. Not all of these folks have abandoned the truck/SUV market. I know of several C4C buyers who have traded in a truck/SUV on a car to claim the $4500 incentive on top of the manufacturers incentives. They now have two cars and intend to trade the older car on another truck/ SUV as soon as feasible... however they could not let that easy $4500 get away from thier pocketbook. They were required to do it this way because the car to car deal would not have qualified as the fuel economy differences were not big enough.

      One traded in a truck for a 2010 Fusion and recieved $4500. Now they intend to trade thier old Taurus on a new F150.

      Another I know traded in an old truck and old car together toward a Suzuki to the tune of $4500 plus the older cars trade value. The total deal came out a few thousand bucks from being nuetral. He paid cash for the Suzuki and is in the market for a new Wrangler or SUV to set up on payments.
      • 5 Years Ago
      Jimhenry, why do you keep mentioning your site here?
      • 5 Years Ago
      While I own auto stock and I appreciate the boost, I ultimately know that I am paying for someone else's new vehicle through tax dollars. If individuals can't afford to be buying new cars without C4C, how can they afford the taxes that support such programs. And who know how many hundreds of millions this cost in administrative costs alone. Ultimately, it is unfair for the government to pick and choose which industries get that "government", or should I say taxpayer financed, boost.
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