By on July 30, 2009

The federal government has put the Cash for Clunkers (a.k.a. C.A.R.S. program) on hold. Supposedly, they’ve run out of money. The MSM is all abuzz with talk of extending the program, allocating more funds and the bummer of a congressional recess (no action ’til after Labor Day). But there’s talk that the number of clunkers hitting car dealers’ lots or the logjam on getting paid isn’t the real reason for putting Cash for Clunkers on hold. Do the math. The program is good for about 200k to 250k rigs, depending on the average rebate qualification. No way there were that many clunkers traded in over the six days since the program went live (official D.O.T. stats after the jump). The real story is that C.A.R.S. over-stimulated the market for new cars (even without a clunker trade); dealers are running out of new vehicles to sell. Or, more to the point, cars that consumers want to buy.

The car manufacturers took a summer holiday; the inventory on the ground is getting too thin (even for Chrysler and GM). Good news for the manufacturers: demand is outstripping supply by a wide margin. Bad news for the manufacturers: demand is outstripping supply by a wide margin.

Will the market still be there when the C4C program restarts, or will the feds create enmity amongst frustrated car buyers? And what of the tens of millions spent by carmakers and dealers advertising the program? How do you put an ad campaign on hold? Foot meet .45. [thanks to Ken Elias for the heads-up]

UPDATE: Automotive News [sub] claims “conflicting reports” on the reason for the moratorium. The news org reports that “U.S. officials had surveyed automakers Thursday about the advisability of a moratorium on the program, said Alex Fedorek, a spokesman for Kia Motors America.”

Official press release:

OFFICIAL D.O.T. CARS PROGRAM STATISTICS

At July 29, 2009 (4:00 PM)

Dealer Registrations:

Number Submitted                                                                                 23,005

Number Approved                                                                                 19,328

Dealer Transactions:

Number Submitted                                                                                 22,782

Dollars Submitted                                                                                  $95.9M

Hotline Contacts:

Latest day (July 28)                                                                                56,430

Cumulative (July 3-July 25)                                                                 98,481

Website Visits:

Latest day (July 28)                                                                              652,380

Cumulative (June 22-July 28)                                                            5,735,202

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36 Comments on “The Truth About the Feds’ Decision to Suspend Cash for Clunkers?...”


  • avatar
    kaleun

    the government being unpredictable and interfering with the market at goodwill without any planning… that is news!

    how can they have run out of cars? there sure are more than 250,000 cars sitting on lots, sea harbors etc.

    Or do people still only buy cars they actually want? Well, they never will get rid of the Sebrings then…

  • avatar
    dwford

    The suspension will let all deals written be submitted and approved so the Feds can see how much money is left. The system they designed is not up to the high volume, given the paperwork they demand and the format they require.

    I predict that it will be back on next week after the logjam clears. In the meantime, buyers wait, dealers and salesmen fume (as they see sales they were counting on for July slide into August – thus killing many a bonus plan).

    I also predict many a dealer that started on this will give it up as not worth the hassle.

  • avatar
    WetWilly

    It looks like the big winner is Hyundai, who frontloaded C4C sales by fronting the money to dealers. Then again, it could be Hyundai’s dumping almost a month’s worth of C4C reimbursement requests on NHTSA the first day the Feds opened for business that swamped them.

  • avatar
    ohsnapback

    Is there any chance that car dealers that already “fronted” the CARS money to customers, took the trade in clunker, and FUBARed the motor won’t get paid after all is said and done?

    There are wild rumors swirling about this very issue.

    What a nightmare.

  • avatar
    John Horner

    Success disasters are always more welcome than the other kind. I think dwford has it right. Economic stimulus wise the good thing about this program is that many people who didn’t have a qualifying vehicle still got off the fence to replace their aging auto.

  • avatar
    Pch101

    There are supposedly 16,000 dealers participating in the program.

    250,000 vehicles / 16,000 dealers = average of about 15 vehicles per dealer

    That works out to be fewer than 4 sales per day per participating dealer. Not really that many.

    It sounds to me as if the program got enough advanced publicity that there were buyers who delayed their purchases waiting for it. Someone in DC didn’t think that through, I guess.

    I would think that the major bottleneck won’t be with the dealerships, but with the wrecking yards. And there are going to have to be federal staffers who verify that these scrapped vehicles don’t end up with salvage title and back on the streets, ala the Katrina cars.

    It’s verifying the demise of the trade-ins that’s really the biggest hassle of the program. Maybe there should be a series of pay-per-view demolition derbys so that we can see them implode live on television. The proceeds from the TV subscriptions and ticket sales can go to pay off the federal budget deficit.

  • avatar
    dodobreeder

    A typical government-run clusterfuck. No other way to put it.

  • avatar
    PeteMoran

    @ John Horner

    Success disasters are always more welcome than the other kind.

    That’s a good dose of perspective for the howling Cassandra’s. Thanks.

  • avatar
    grobby2

    Just got back from purchasing a 2009 Ford Escape. I did not use cash for clunkers. WHile I was there, the announcement about the program being suspended was made known. The salesman and the general manager told me they were not surprised. They had been swamped with offers and so had all of their fellow dealerships. They told me that the demand for cars had been tremendous and they believed that the goverment had no idea what it was getting into with this program.

  • avatar
    cardeveloper

    Pch101 :
    Someone in DC didn’t think that through, I guess.

    ya think, roflmao

  • avatar
    Ken Elias

    The stats suggest that only 23,000 deals have been submitted as of late Thursday. Let’s assume that it’s just half of pending C4C deals out there…so maybe a total of 50,000 C4C deals done so far…still leaves a lot of room in the program.

    What’s missing here is that the program is driving lots of traffic to dealers mostly from those not with a clunker…and the dealers are selling out of cars and want to put a brake on the program until they can restock. It’s not all C4C deals…it’s the latent demand of nine months of below normalized sales now catching up. The C4C program stimulated this unleashing of getting folks thinking about a new car…so as the inventory sells out, no point running a C4C program.

  • avatar
    P71_CrownVic

    It would be very interesting to see what the actual breakdown of the C$C trade-ins were.

    More specifically, who made out the best…USA (GM, etc), Europe (BMW, Mercedes, Porsche, etc), or Asia (Hyundai, Honda, Toyota, Nissan, etc).

  • avatar
    kaleun

    P71_CrownVic:
    I assume Hyundai/Kia, possibly some GM/Chrysler. Much of Ford. Possibly some Toyota Honda/Nissan etc.
    it is hard to imagine too many people with cars worth way less than $ 4,5000 buying a Porsche or BMW. They might buy a VW as it will be in the shop as often as their old clunker, so they don’t feel homesick for the old car ;-)

  • avatar
    gslippy

    My estimate that CFC would boost sales by 2%, coupled with the ‘official’ claim that CFC is out of money, would mean that every vehicle sold this past week was a CFC deal.

    There is no way that happened.

    The biggest losers will be the angry dealers.

    And let’s be clear: the only inventory shortage is on the vehicles purchased under CFC. We’re still swimming in Escalades and Sierra vans.

  • avatar

    How many drivers that made the person decision to drive and insure a pile of shit ride for the past 12 months can actually qualify to buy a new rig. That narrows it down to recent legal settlement recipients, freshly signed pro atheletes, and strippers that just got hired at the ‘classy joint’ from the shithole joint.

    oh yea almost forgot….democrats :)

  • avatar
    spyspeed

    I think the NHTSA’s inability to process the claims is the real reason for the suspension. Even if all the kinks had been worked out in advance, hundreds of employees would have had to been organized and trained in a very short period of time. Obviously, it didn’t happen.

  • avatar
    sutski

    Hahahahahahahaha – unbelievable…and these muppets are running the country too ??

    Wow.

    Hey, good luck out there!

  • avatar
    WildBill

    jwolfe, my POS clunker ride was a 4th car just sitting around not getting used. It will go when the program starts back up. I can more than afford a new vehicle even now, but when Uncle is passing out the candy I’m there to take advantage, god knows I’ve paid enough taxes over the last many years to not be concerned about taking a few dollars of it back.

  • avatar
    cmcmail

    I think it would of been much more effective and fair to just drop the sales tax and make car purchases deductible on income tax for a limited time. That way the taxpayers that are interested in a car can support the company they want, instead of the Gov. deciding for us.
    Just a thought.

  • avatar
    NulloModo

    jwolfe – While we have had our fair share of credit disasters coming in, there are a lot of people coming in who are doing just as WildBill plans, getting rid of second, third, or fourth cars that they have kept around simply because they weren’t worth anything to trade in and they were handy to have for kids, etc.

    I doubt BMW, Mercedes, Porsche, or any of the upper-luxury brands have been getting much business on this as the program limits the price of the new car to an MSRP of $45,000 or less, which eliminates most of their lineup.

  • avatar
    dwford

    @jwolfe:

    The people coming in on this program can more than afford it. They are driving these POS cars and trucks because they are extreme cheapskates, not because they re broke. We even have customers demanding that they get not only invoice- holdback deals, be able to pay cash, but also that they get the scrap value for the car(which is supposed to go to the dealer to cover the expense of blowing the motor etc)!!

    This program might be selling cars, but it is not doing much to generate profits for the dealers. it’s just a big headache that will create shortages over the next 2 months while we are between model years.

  • avatar
    Jimal

    The report I heard on CNBC last night when this broke was that the clunker program had burned through its $1 Billion in funding already (the quoted number).

    If I’m a dealer (or a manufacturer at this point) I’m steamed if this is a paperwork issue. Seems to me that if the issue was the inability to deal with the volume of paperwork, they would have said that since one would assume the program would start back up once the logjam was cleared. Buyers will just hold off a bit until the program starts back up. To say the program is out of money already opens the bigger question of whether to continue the program or not. Buyers thinking they missed the boat may decide to hold onto their money.

  • avatar
    GS650G

    Anybody want these bastards running health care in this country? If this does not predict what a single payer system would look like think again. Imagine the sudden demand for Free Health Care as soon as Obama is writing the checks.

    What if they took over and then suspended that?

    I’m pissed. My neighbor just did his POS Cherokee the other day with a bad head gasket and I was set to do mine. 4500 dollars and he barely made it to the dealer. He was laughing all the way home in his new car. I was all set to cash in my truck for twice it’s value.

  • avatar
    slateslate

    ***There are supposedly 16,000 dealers participating in the program.

    250,000 vehicles / 16,000 dealers = average of about 15 vehicles per dealer

    That works out to be fewer than 4 sales per day per participating dealer. Not really that many.***

    IIRC the rules also say that the rebate is retroactive to any car purchased after July 1 and the average age of a car in America is around 8 years old.

    So yes…..Hyundai was smart (or lucky) in rolling the dice, jumping the gun and front-running the rebates.

  • avatar
    John Horner

    “The people coming in on this program can more than afford it. They are driving these POS cars and trucks because they are extreme cheapskates, not because they re broke.”

    In other words, the program had the desired demand stimulation effect. People who manage their money with care and never got in over their heads got off the fence and bought a new car or truck. Local sales taxes and registration fees are likely to replace most of the federal incentive money, so net-net the combined government (federal & state) is probably out little or no money. Income taxes will be collected from the salesman, other dealer employees, the delivery drivers, manufacturers and so on.

    Frugal customers are enjoying a better vehicle, cash which was sitting in their checking accounts is now circulating through the economy and the government taken as a whole isn’t out any money.

    This is probably the most effective economic stimulus effort which has been tried.

    BTW, all official announcements this morning say the program is still running, contrary to the rumors of yesterday. Speaking of which, I thought that we were deeply skeptical of stories originating with un-named sources around here?

    “Anybody want these bastards running health care in this country?”

    Are you proposing that the VA and Medicare be shut down? All in all, 26% of people in the US are already covered by Medicare, Medicaid, Military health care systems and the like.

  • avatar
    Rod Panhard

    Here’s two alternative perspectives:
    1. Cash for Clunkers was really to clear the dealers’ lots of the turkeys that wouldn’t sell. The Sebrings and Avengers, etc. When they saw that the program wasn’t really helping clear the turkeys out of the lots, then the money “ran out.”

    2. I beg to differ with Mr. Horner about what this policy does for responsible individuals. Here’s why. The truly frugal and responsible individuals out there have been driving eco-friendly and responsible vehicles all along. Not only that, but they’ve been maintaining their vehicles and get a lot of use out of them before the wheels fall off.

    The C4C bill is about “reducing carbon footprint” and reducing our dependency on foreign oil while helping the manufacturers. Well, why should we reward manufacturers for poor performance? Shouldn’t we reward car owners for stellar performance and responsibility, too?

    Shouldn’t the guy across the street with the Escort Wagon, the administrative assistant with the 10-year-old Corolla, my old boss who drives a 12 year old Civic even though he can afford better? These are the responsible people. They’re reducing pre-consumer carbon admissions by keeping a responsible car on the road in fine operating condition.

    That’s who should be rewarded. What the C4C program does is reward people who got a huge tax break when they bought a fashionable SUV that they could drive through the loophole that was designed for farmers and oilmen, but wound up benefiting CPAs, Realtors and lawyers. I know at least one of each who bragged about it. And now, they’re taking advantage of C4C while their admin assistants are still driving the same Corolla, Accord or Camry they drove 10 years ago.

    So who is REALLY getting screwed here Mr. Obama? Believe me, it’s not the people you hoped to benefit.

  • avatar
    LilGasPasser

    ***“Anybody want these bastards running health care in this country?”

    Are you proposing that the VA and Medicare be shut down? All in all, 26% of people in the US are already covered by Medicare, Medicaid, Military health care systems and the like.***

    1. Anyone in the health care field knows that VAs are pretty poor hospitals…great electronic medical records, poor medical care. It’s the dirty little secret the guvment doesn’t want you to know.

    2. I’m very scared for the future state of medicine. With the rumored 20-30% drop in salaries for physicians, most bright young minds aren’t too keen on pursuing medical school, so that they can come out with $250k debt to a $110k/year career, and deal with 70 patients per day in a primary care office. Combine that with the early retirement of experienced docs who have been fiscally wise over their careers, and you’re looking at a medical field staffed by young, inexperienced, poorly trained (“we need more docs? train more quick!”), unmotivated folks who weren’t the head of their class at any point in their lives. Those people are all in banking…

    Thanks, I feel better now.

  • avatar
    Hippo

    The demographic that drives these cars and dealers are crooks and scammers almost by definition.
    Likely they found an even higher level of outright lies in the documentation then we estimated nd had to put a hold on it.

    For example the requirement that the car be drivable. If the dealer is in charge of making the engine unusable without outside supervision, they can take any POS towed in on a flatbed and dumped on a parking spot to make the sale. Who is going to prove different by starting it if they claim they destroyed the engine?

    They should have made it into a sting operation and terminate all dealers engaged in fraud. Takes care of excess dealers and then some. LOL.

  • avatar
    fendertweed

    @GS650G

    you do realize that the govt. already has a huge hand in running health care, and that in fact govt. runs the health care system that has by far the highest consumer satisfaction ratings –> Medicare.

    check out some reality based information on this at:
    http://www.nytimes.com/2009/07/31/opinion/31krugman.html

    don’t take my word for it, see a Nobel Prize winner’s analysis.

  • avatar
    GS650G

    fendertweed :

    I’m fully aware the gummint is already too far involved in health care already. It’s a prime contributor to the run away costs we have thanks to underpaying and cost shifting along with providing services below actual costs. So there is little wonder it has high satisfaction ratings from the beneficiaries, free cheese does that for people.

    Krugman may have a Nobel prize but that doesn’t make him the argument end-er for any of this. Plenty of other Nobel winners disagree completely with him. If you follow Paul that’s your choice.

    The NY times is a tragedy in itself.

  • avatar
    Pch101

    “The people coming in on this program can more than afford it. They are driving these POS cars and trucks because they are extreme cheapskates, not because they re broke.”

    In other words, the program had the desired demand stimulation effect. People who manage their money with care and never got in over their heads got off the fence and bought a new car or truck.

    If that’s an accurate reflection of what is happening, i.e. encouraging consumption that would have been otherwise long deferred or not undertaken at all, then the program does make sense. The real threat to the economy has been deflation, and you fight deflation with spending. The program can produce some benefit, even if it has kinks in it.

    That being said, it really does seem that the US is more incompetent in its efforts to manage its public initiatives than other western governments. Maybe the German press just isn’t as aggressive in finding faults or we don’t otherwise hear about their mistakes, but it sure seems as if we have a habit of making more errors. If the automakers are a good example, our execution really does seem to suck.

  • avatar
    GS650G

    C4C does not get you into a new ride FOC. You have to take on either debt or dip into the nest egg to get the car. If they offered 10K for a clunker trade in then you could actually find something that replaced the paid off gas hog SUV one for one.

    I’ve been considering a car for quite some time and this deal made it possible to go from 3 cars to 2 once I sold my high mileage Escort off.

  • avatar
    ohsnapback

    Don’t let this…

    http://www.youtube.com/watch?v=waj2KrKYTZo

    …ever happen again.

    This program is beyond idiotic.

  • avatar
    BDB

    That being said, it really does seem that the US is more incompetent in its efforts to manage its public initiatives than other western governments

    Being a sh*tton bigger in population than any other western nation can do that. It makes it a good deal more complicated to run. We’re talking about 82 million people in Germany vs. 300 million in the United States. My home state (Virginia) has the same population as all of Sweden. Texas has as many people as all of Canada.They probably should have given the money to the states and let the state governments run it.

  • avatar
    P71_CrownVic

    don’t take my word for it, see a Nobel Prize winner’s analysis.

    Al Gore won the Nobel Prize…that award means nothing

  • avatar
    John Horner

    Actually the program was never put on hold, that was just an unsubstantiated rumor.


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