The Truth About the Feds' Decision to Suspend Cash for Clunkers?

by Robert Farago

Published: July 30th, 2009

the truth about the feds decision to suspend cash for clunkers

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

Robert Farago

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2 of 36 comments

Anonymous on Jul 31, 2009
don’t take my word for it, see a Nobel Prize winner’s analysis. Al Gore won the Nobel Prize...that award means nothing

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John Horner on Aug 04, 2009

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

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