By on December 7, 2009

Kaboom! (courtesy:calculatedriskblog.com)

From the Calculated Risk Blog comes this manifestation of the cash-for-clunker boom, as measured by Google’s auto buyer index. Because of seasonal downturn, it seems that pull-forward may not have been as devastating as was once thought. But will next January see the usual post-holiday recovery again?

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10 Comments on “What’s Wrong With This Picture: Clunker Crunch Edition...”


  • avatar
    Contrarian

    In a word; No. Buying habits have been changed for a generation.

  • avatar
    210delray

    Changed for a generation?  Those are mighty strong words.

    Somehow, I doubt it.

    BTW, this graph strongly hints it’s clearly best to wait until late December to get the best possible deal on a new car.

    • 0 avatar
      Contrarian

      The Depression babies never learned to spend again, even after many decades went by.  They took their frugality to their graves. Another generation will have to replace them before we have impulse-and-envy car buying again.

  • avatar
    don1967

    One can clearly see a declining overall trend since 2005, with progressively lower peaks each summer.     The only thing likely accomplished by the Cash for Clunkers program was to suck the next 12 months’ demand out of the market ahead of schedule… essentially mortgaging the future as a solution to years of mortgaging the future.
     
    The spending excesses of the past 25 years have not been repaid yet.    Until we wean ourselves off of low interest rates and government stimulus spending, and until the line-of-credit generation loses all faith in real estate as a perpetual wealth generator, the credit bubble will not be over.    It’s a long road ahead.

  • avatar
    porschespeed

    Even the ‘official’ number for unemployment continues to grow. 
    The average value of real estate continues to fall.  
    The number of homes being foreclosed is growing. 
    The number of pre-forclosures continues to grow.
    The number of people late on their credit cards is growing.

    There is precious little data that would indicate stronger auto sales in 2010. 

    Yes, the world will keep turning.
    No, the fantasy economy of  preposterously leveraged  money sloshing around ain’t coming back for quite a while. 10 years of nonsense takes a long time to unwind.

  • avatar
    ott

    Amen, Porschespeed.

  • avatar
    Mark MacInnis

    This just in:  “Nero fiddles, Rome continues to burn…..”

    There are a finite number of consumers at any point in time with the desire or need for a new vehicle.  Of this group, there is a finite number of people with the means necessary to buy/finance a new vehicle purchase.   C4C undeniably plucked some of those buyers, who likely would have purchased in early 2010, and sucked their sale into the 3rd quarter of 2009. 

    It is unlikely in extremis that C4C convinced any consumers who would not have otherwise purchased a new vehicle to do so. 

    Anyone who argues that C4C did anything other than pull ahead sales, at the expense of future sales, is in near-pathological denial….

    We are entering a glacial period, where nearly all auto sales will be on a “emergency replacement” basis….gone are the days of the automatic, every-4-to-5-year replacement cycle for most American consumers.  Instead of keeping UP with the Jones, Mr. and Mrs. America are trying to keep AHEAD of their mortgage lenders in an era when KEEPING your job at your CURRENT salary is the new “annual C.O.L raise”….

  • avatar
    Daanii2

    I’m not in favor of cash for clunkers schemes. But not because of pull-forward. Did people think that pull-forward would be devastating? I don’t see it.

  • avatar
    johnthacker

    Look, no one really knows.  That’s part of why the overheated official response of the White House to some estimates was so silly.  As the economists who prepared the White House estimate admitted, we don’t know; we’ll know more later, but it will always be hard to know what would have happened without the program.  I think that the program mostly gave money to people who would’ve bought a new car at some point relatively soon, and that a lot of the rest went to people who cut down on spending elsewhere and thus didn’t stimulate the economy.
     
    Perhaps something worse about it is that the money went to upper middle-class people who could buy new cars, but by destroying the old cars it raised used car prices and made people who buy used cars (which skews poorer than new car buyers) worse off.  Is regressive policy the right approach?

  • avatar
    davejay

    I suspect people’s spending habits will be smarter, rather than lessened. Of course, that’s just a guess, but if it pans out you should expect to see smaller cars and greener cars and less-expensive cars getting the sales going forward — but overall no notable long-term reduction in sales. Theoretically, short-term slumping sales would be people strongly aware of upcoming smaller/greener/less-expensive choices (volt, leaf, fiesta, et al) and so are going to hold out.


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